NBFCs - Registration and Compliance

The non-banking financial companies (NBFCs) are on rise and form’s an important part of the Indian financial system. The non-banking financial companies (NBFCs) are a group of institutions that are heterogeneous in nature that raises funds from the public in direct and indirect ways.

The institution takes upon the role of an intermediate financial functionary in different ways, like accept deposits, giving loans, hire and purchase, etc. With their growth as customer-oriented services, they are being treated as complementary to the banking sector.

Registration

The registration of non-banking financial companies (NBFCs) is a rather simplified process. It requires the submission of an application in the name of the company. The application must be accompanied with the documents required by the Reserve Bank of India (RBI). 

The Reserve Bank of India (RBI) is the central governing authority in relation to the non-banking financial companies (NBFCs). If the Reserve Bank of India (RBI) finds that all the necessary documents and conditions have been met with, it will issue a Certificate of Registration. The importance of a certificate of Registration is that only such non-banking financial companies (NBFCs) can validly hold public deposits.

Initially, the NBFCs had privileges over banks as the Reserve Bank of India (RBI) was lenient to these relatively new institutions. However, over time the NBFCs became a big part of other organs of the financial sector. It, therefore, became essential for the Reserve Bank of India (RBI) to recognize the risks that were involved with the dependence on such non-banking financial companies (NBFCs).

In 2014, the Reserve Bank of India (RBI) made certain amendments to the regulations that were laid down in relation to the non- banking financial companies (NBFCs).

The objectives of these changes were to:

1. Come to terms with the risks in the sector;
2. To bridge the gaps between the non- banking financial companies (NBFCs) and other financial institutions;
3. To facilitate and harmonize the working of the non- banking financial companies (NBFCs); and
4. To raise the governance standards.

Necessary Compliances related to non- banking financial companies (NBFCs).

ANNUALLY

1. Submission of Annual Statements and Returns.

The non-deposit category within the non-banking financial companies (NBFCs) are required to submit annual reports related to the capital funds and risk asset ratio.

2. Capital to risk assets ratio;
3. Non-deposit NBFCs are also required to provide statements related to the monthly and half-yearly liquidity as well as the Interest Rate;
4. Statutory Audits;
5. Information about Foreign Funds;
6. Declaration of the Auditors.

MONTHLY

1. Statement of the short-term liquidity;
2. Monthly Return on non-deposit non-banking financial companies (NBFCs) with an asset size of 100 Cr and above;
3. Monthly Return on Exposure to Capital.

QUARTERLY

1. Quarterly Returns on deposit;
2. Quarterly Statement of Capital, Risk, Assets;
3. CA and CEO certification;
4. Return of Investment.

OTHER COMPLIANCES

1. Appointment of Director,
2. Resignation of Director within 30 days, and
3. Any new notification being adopted by Board Meeting, file copy with RBI.