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NBFC Compliance in India

Tired of paperwork during the NBFC compliance process? Contact Canjain for expert guidance and effortless adherence to regulatory standards for your NBFC today!

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An Overview of NBFC Compliance

NBFC compliance refers to the process of managing regulatory requirements, which ensures compliance in a competitive industry. Compliance with NBFC regulations further provides a secure financial environment, serving as an alternative source of credit for individuals and businesses.

Setting up an NBFC requires completing various formalities, such as handling compliance, protection of reputation, obtaining registration and licenses, data protection, and maintaining adequate capital. However, the NBFCs in India must adhere to stringent operational norms, regardless of their size or sector.

Are you worried about the challenges in meeting the NBFC compliance needs? Let our experts at Canjain help you feel good while we handle your NBFC compliance management tasks.

What is NBFC?

NBFC, which stands for Non-Banking Financial Company, is an integral part of the Indian financial system. It is a company that provides an alternative source of credit to individuals and businesses. NBFCs involved in the business of receiving deposits, loans, and advances, acquisitions of stocks, bonds, shares, debentures, and securities issued by the government of India are required to be registered under the Companies Act, 2013.

Benefits of RBI Compliance for NBFC Company

The key benefits of securing RBI compliance for NBFC company are as discussed below:

  • Enhance Market Reputation
  • RBI compliance for NBFC company enhances market reputation and customer’s trust over the NBFCs.
  • Ensure Business Continuity
  • RBI compliance for NBFC company helps you avoid situations for revocation of your license and ensures the continuity of NBFC business in India.
  • Safeguards the Interest of Individuals
  • RBI compliance for NBFC company guaranteeing stability and smooth functioning of the financial system safeguards the interest of individuals.
  • Business Expansion
  • NBFC company compliances leads to the expansion of businesses by enhancing credibility with investors and lenders.
  • Reduces Risk
  • RBI compliance for NBFC reduces organizational, legal, and other regulatory risks affecting the operational stability of the business.
  • Business Continuity
  • NBFC company compliances helps maintaining reputation and ethical operations, leading to business continuity.
Pre-NBFC Registration Compliance

Compliance with the pre-NBFC registration requirements as specified by the RBI is crucial for the businesses seeking pre-NBFC registration compliance:

Checklist for Pre-NBFC Registration Compliance

  • Registration & Licensing: The first step for securing NBFC compliance is to proceed with NBFC registration and get NBFC license by the Reserve Bank of India.
  • Capital Adequacy: The pre-NBFC registration compliance requires businesses to maintain capital adequacy and financial stocks within a minimum ratio governed by the rule.
  • Data protection: Adherence to the Personal Data Protection Bill, 2019 for protection from mishandling of data is essentially required to secure pre-NBFC registration compliance.
  • KYC & AML: Securing KYC (know your customers) and ALM (anti-money laundering) is a part of NBFC registration compliance, which requires businesses to look for proper records and reports (if required).
Documents Required for NBFC Compliance in India

The list of documents required for securing NBFC compliance are as enlisted below:

  • Memorandum and Articles of Association
  • Minutes of Meetings
  • Statutory Registers
  • Audited Financial Statements & Balance Sheet
  • Shareholding Records
  • Details of Directors
  • Any Other Documents (if any)
Procedure to Obtain NBFC Annual Compliance

The procedure required to obtain NBFC annual compliance is as discussed below:

  • File Application
  • The NBFC are initially required to file, prepare, and file an online application along with an acknowledgement.
  • Comply with Pre-NBFC Registration Criteria
  • The NBFC must comply with the pre-NBFC registration enforcement criteria required for securing NBFC compliance.
  • Submit All Documents
  • The NBFC are further required to make submission of necessary documents and exchange appropriate drafts.
  • Submission of Application
  • Lastly, the documents are duly verified, and the application shall be finally submitted for securing guaranteed compliance with NBFC guidelines.

 

 

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Categories of NBFC that Need NBFC Compliance

The different categories of NBFC that play a detrimental role in financial systems that need NBFC compliance are as discussed below:

NBFCs Based on Activities that Need NBFC Annual Compliance
  • Investment and Credit Company (NBFC-ICC) which is primarily engaged in asset financing through offering credit.
  • Mortgage Guarantee Companies (MGC) which comprises a net owned fund of at least Rs. 100 crores.
  • Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI) which precisely carries out business tasks like banks.
  • Infrastructure Finance Company (IFC), which utilizes at least 75 of its total assets in infrastructure loans.
  • Non-Banking Financial Institution-Factors which are involved in factoring at least 50% of the business assets.
  • NBFC Account Aggregator which offers services for retrieval or collection of financial data relevant to financial assets of its clients.
  • Housing Finance companies are those NBFCs that are mainly involved in financing the acquisition or construction of homes.
  • P2P lending NBFC, which connects individual borrowers and lenders digitally.
NBFCs Based on Liability that Need NBFC Compliance
  • Deposit Taking NBFC which accepts deposits from the public
  • Non-Deposit Taking NBFCs, which do not accept deposits from the public
  • Systematically Important Core Investment NBFC (NBFC-ND-CIC-SI) which mainly invests in securities of their group companies.
  • Other Non-Deposit Holding Companies.

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