Get an NBFC certificate of registration from the RBI

Law

Section 45-IA, RBI Act 1934

Regulator

Reserve Bank of India

NOF (NBFC-ICC)

₹10 crore

Typical time

Several months, varies with RBI queries

Who needs NBFC registration

A company must register as an NBFC if its principal business is financial activity such as lending, investment in securities, hire purchase or leasing. RBI applies a two-part test, often called the 50-50 test: financial assets are more than 50% of total assets, and income from financial assets is more than 50% of gross income. A company that meets both is treated as an NBFC and cannot carry on that business without registration.

Some entities are outside this requirement because another regulator covers them, such as insurance companies, stock brokers, merchant bankers, chit funds and Nidhi companies. Certain Section 8 companies doing microfinance are also exempt subject to conditions.

NBFC types and net owned fund

Net owned fund (NOF) is paid-up equity capital and free reserves, less accumulated losses, intangible assets and certain investments in and loans to group companies. RBI's scale-based regulation, effective from October 2022, raised the NOF for several categories. The main figures are:

New applicants are generally expected to meet the full current requirement. RBI revises these figures from time to time, so we confirm them against RBI's latest master directions before an application is filed.

Scale-based regulation in brief

RBI now regulates NBFCs in layers according to size and risk:

• Base layer: non-deposit-taking NBFCs with assets below ₹1,000 crore, and NBFCs such as P2P platforms and account aggregators. Most new NBFCs start here.
• Middle layer: deposit-taking NBFCs, non-deposit-taking NBFCs with assets of ₹1,000 crore or more, and certain specialised categories such as housing finance companies and core investment companies.
• Upper layer: NBFCs specifically identified by RBI on size, interconnectedness and other parameters, with bank-like regulation.
• Top layer: kept empty, for cases where RBI sees a sharp rise in risk.

As an NBFC grows, governance, capital adequacy, risk management and disclosure requirements increase. New NBFCs are not given licences to accept public deposits.

The application process

1. Company formation: a private or public company with financial activity as its main object in the memorandum, or an existing company that amends its objects.
2. Capital: NOF brought in by promoters, generally kept in a fixed deposit free of any lien until registration, with the source of funds documented.
3. Board and team: directors with relevant finance experience, fit-and-proper declarations, and a management team able to run credit and compliance.
4. Online application: filed with the RBI with the business plan, financial projections, policies, KYC of promoters and directors, credit reports, bank and auditor certificates and the shareholding structure.
5. RBI examination: the regional office examines the application, may seek clarifications and may meet the promoters. Prompt and complete replies shorten the process.
6. Certificate of registration: issued once RBI is satisfied. Business can start only after the certificate is received.

What RBI looks for

RBI assesses whether the business is likely to be run soundly. In practice, that means a clear and realistic business plan with target customers, products and funding sources; promoters and directors with clean credit and regulatory records and relevant experience; a transparent shareholding with traceable funds; and governance policies that are actually tailored to the business. Applications with generic templates, unexplained funds or vague plans are the ones returned.

Why NBFC applications get returned

• Unclear source of funds: capital that comes through layers of companies or unexplained loans is the most common concern. Each rupee of NOF should be traceable to the promoters' own funds.
• Template policies: fair practices, credit and KYC policies copied from another NBFC, without reflecting the actual products, are easy for RBI to spot.
• Weak board: a board without any finance experience, or with directors linked to defaulting or deregistered entities, raises doubts about fitness.
• Mismatch between plan and capital: projections that assume rapid growth without explaining where borrowings will come from.
• Incomplete or inconsistent documents: names, addresses and figures that differ across forms, certificates and statements.

We review each of these before filing, because a returned application usually has to be filed again and the time already spent is lost.

Do you actually need an NBFC licence?

Not every finance-related business needs to be an NBFC. A loan marketplace or loan service provider that only sources borrowers for banks and NBFCs, without lending its own money, works under RBI's digital lending and outsourcing rules through its regulated partner rather than its own licence. A community savings-and-loan model among members may suit a Nidhi company. We look at your model first and recommend registration only where it is truly needed.

Compliance after registration

• Periodic returns to RBI, based on the NBFC's layer and asset size
• Annual statutory auditor certificate confirming that the NBFC continues to meet the principal business criteria and NOF
• Fair practices code, KYC and anti-money-laundering compliance, including reporting to the Financial Intelligence Unit
• Membership of credit information companies and reporting of borrower data
• Grievance redressal system and coverage under RBI's Integrated Ombudsman Scheme where applicable
• RBI's prior approval for changes in control, shareholding or management beyond prescribed limits
• Company law filings through ROC annual compliance

Costs and timeline

The largest cost is the NOF itself, which stays in the business. The other costs are company incorporation, policy drafting, auditor certifications and professional fees. RBI does not publish a fixed processing time, and applications commonly take several months; queries and incomplete documents add to that. Promoters should plan finances on that basis rather than on an optimistic date.

Documents you need

For the company, promoters and directors:

• Certificate of incorporation, memorandum and articles with financial objects
• KYC, PAN and address proof of promoters and directors
• Directors' profiles, educational qualifications and finance experience
• Credit reports and fit-and-proper declarations of directors
• Bank certificate of fixed deposit for NOF and statutory auditor's NOF certificate
• Business plan with three to five year projections
• Board-approved policies: fair practices, KYC and AML, credit, grievance
• Shareholding pattern and source of funds of promoters

How we handle it for you

1. Eligibility review

   We check the category, NOF and promoter profile against current RBI directions.

2. Structuring

   Company formation or object change, capital infusion and board composition planned.

3. Application drafting

   Business plan, policies and declarations prepared to RBI's expectations.

4. Filing and follow-up

   Application filed and RBI queries answered until the certificate is issued.

5. Compliance setup

   Returns, credit bureau, KYC and governance calendar set up for the first year.

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Frequently asked questions