NBFC Company Consultancy
Non-Banking Financial Company (NBFC) is a type of financial company that can provide consumers with financial products and services despite not having a banking licence. Loans and advances, buying shares, hire-purchase, financing leasing, chit funds, etc. are the main topics of NBFC registration. An NBFC must differ from a bank in several aspects, such as the inability to take savings and current account deposits, the inability to issue checks drawn on itself, and the lack of deposit insurance and credit guarantee coverage for its customers.
The advantages of a Non- Banking Finance Company
The advantages of a Non- Banking Finance Company
Time and money efficient: Registering an NBFC is simpler than registering a small bank. Opening a bank requires an excessive amount of time and money.
Simple Registration: Registering with NBFC is simple.
Industry Growth Ratio: At the moment, the fintech sector is growing as more people look for quick sources of funding. Therefore, it will be beneficial for ambitious business owners to register them under NBFC and generate a healthy return.
Easy Loan Recovery: Since NBFCs are very organised and offer significantly smaller loan amounts, borrowers easily repay the money, which is advantageous for lenders.
Step 1: is to register a business with the Companies Act of 2013.
Step 2: A company’s minimum net owned funds should be at least Rs. 2 crores.
Step 3: A minimum of one director in a corporation must be from the same background.
Step 4: A high CIBIL score is necessary in order to register as an NBFC.
Step 5: Next, fill out an application on the RBI’s official website.
Step 6: Submit the necessary paperwork and an application.
Step 7: A CARN number will be generated when we have submitted an application.
Step 8 : To mail a hard copy of the application to the local RBI branch.
Step 9: After an application has been examined and verified, the company will be granted a licence.
In India, the Reserve Bank of India oversees NBFC regulation (RBI). According to RBI regulations, an NBFC is not allowed to do non-banking financial activities if it does not have a certificate of registration from a bank (with the exception of NBFCs that are not under the control of the RBI) and if it does not have Net Owned Funds of Rs. 2 crores.
The following RBI regulations must be followed by any NBFC created under the Companies Act of 2013 that want to start a non-banking finance business:
According to Section 3 of the 2013 Companies Act, it must be registered.
It must comply with the minimum criterion of Rs. 2 crore in Net Owned Funds (except for NBFC-MFIs, NBFC-Factors, and CIC)
A company’s most recent audited balance statement can be used to compute Net Owned Funds. Total Owned Funds will be made up of Paid-up Equity Capital, Share Premium Account Balance, Free Reserves, and Capital Reserve. Subtract Revaluation Reserves, the book value of Intangible Assets, and the Balance of Accumulated Loss from Total Owned Funds to arrive at Net Owned Funds. The owned funds will be deducted from the net owned funds if the investment in shares of other NBFCs, debentures, and shares of subsidiaries and group companies is greater than 10%.
A certificate from the statutory auditor declaring that the business does not hold and does not accept the public deposit.
A certificate stating owned money as of the application date from the Statutory Auditor is necessary.
Details on the bank account, loans, balances, credits, etc., must be provided.
The directors’ and auditors’ reports from the previous three years, as well as an audited balance sheet and profit and loss statement, must be submitted, if appropriate.
Bank statements that have been self-certified are required, as are income tax returns.
Details of a company’s future strategy, often for the following three years, as well as projected balance sheets, cash flow statements, and income statements.
A certificate from the Statutory Auditor stating owned money as of the application date is necessary.
Information must be provided regarding the bank account, loans, balances, credits, etc.
If relevant, a balance sheet and profit and loss statement that have been audited as well as the directors’ and auditors’ reports from the three years prior must be submitted.
Income Tax Returns and a self-certified copy of a bank statement are needed.
Information describing a business’s projected balance sheets, cash flow statements, and income statements over the ensuing three years.
JJJ is committed to assisting start-ups and MNCs with legal and regulatory issues associated with establishing and operating their businesses. Our objective is to provide one-click access to all people and businesses for all of their legal and professional needs. We have worked with many Indian Fintech companies, assisting them in establishing a lending operation and securing approval from the SEBI and RBI.
Overview of Nidhi Company Registration
According to Section 406 of the 2013 Companies Act, a Nidhi company is a specific type of entity recognised in the non-banking financial industry. Their main activity is the lending and borrowing of money among their members. Additionally, they are thought of as Benefit funds, Permanent Funds, Mutual Benefits, and Mutual Benefit Funds Companies. These organisations are governed by the Ministry of Corporate Affairs in India, which also retains the authority to issue directives regarding deposit acceptance procedures. These organisations’ main goal is to instil a culture of saving and prudent spending among their serving members. In the south of India, the Nidhi Company idea is fairly well-liked.
No RBI approval is necessary to establish the Nidhi firm in India. As a result, it is quite simple to incorporate.
Nidhi Companies are registered as public corporations.
Their name must be followed by “Nidhi Limited.”
The undertakings of Nidhi Companies are relatively comparable to NBFCs, and as a result, they fall under the purview of the Reserve Bank of India.
The primary goal of Nidhi Company mainly focuses around internal loan and borrowing activities with zero involvement from outside parties.
The 2014 Nidhi Rules give Nidhi permission to offer its members locker space for rent. Any time during the fiscal year, the rental income shouldn’t be higher than 20% of the company’s total revenue.
The Governing Authority sets the following Conditions for Incorporating Nidhi Company in India:
7 minimum required members (3 members should be the designated directors)
Rs. 5 lakhs is the minimum equity share capital.
Mandatory inclusion of the Company’s object in MOA demonstrates its goal to promote the habit of thrift and saving among the members. • Must have limited company status under the Company Act of 2013.
Major advantages of Nidhi company registration in India include the following:
A fairly straightforward procedure is used to create a Nidhi Company. A minimum of seven members, of whom three will be appointed as directors, as well as a simple and straightforward documentation process are necessary for the formation of Nidhi Company.
Disrespect for the Reserve Bank of India
Any Reserve Bank of India regulations are not necessary for a Nidhi Company to follow. Therefore, the Nidhi Company is free to establish its own policies.
As only members conduct lending, borrowing, and depositing operations, the chance of any financial problems in the Nidhi Company is reduced.
Since the Nidhi Company registration process is more simpler than those of other NBFCs, it does not have a significant financial impact on the Director. Additionally, it assists the Nidhi Company in obtaining commercial financing as needed for corporate expansion.
The idea behind the goal of a Nidhi Company is to encourage saving among Indians.
System of Net-Owned Funding
A Nidhi Company adheres to the Net Owned Funding System, which refers to the transaction where a sum of money is invested in the company to raise money for it. This quality lowers the cost of ownership for owners and aids in company expansion for Nidhi Companies.
The following are some of the limitations imposed by the 2014 Nidhi Rules on Nidhi Companies. According to Rule 6 of the 2014 Nidhi Rules, a Nidhi Company shall NOT:
- Do business in the areas of chit funds, hire buy financing, lease financing, insurance, or the purchase of securities issued by any body corporate;
- Issue debt instruments such as debentures, preference shares, or any other type of debt instrument under any name or format;
- Establish any current account with its participants;
- acquire another company through the purchase of securities, exert any kind of influence over the make-up of the board of directors of another company, or make any arrangements for a change in management, unless a special resolution was passed at the general meeting and the Regional Director with jurisdiction over the relevant Nidhi gave their prior consent;
- Provided that Nidh is that have complied with all of the requirements of these regulations may offer locker facilities for rent to their members, subject to the rental income from such facilities not exceeding twenty percent of the Nidhi’s gross income at any point during a financial year.
- Accept money as a deposit or lend to anyone besides its members;
- Any of the assets that its members have deposited as security;
- Accept deposits from or make loans to any corporate entity;
- Engage in any partnership agreements when it comes to borrowing or lending;
- Issue, or cause to be issued, any advertisement in any form for soliciting deposits; provided, however, that private distribution of fixed deposit scheme details among Nidhi members bearing the phrase “for private circulation to members only” shall not be regarded as such.
- Pay any brokerage or reward for collecting member deposits, deploying funds, or approving loans.