Setting UP Of NBFC

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Setting UP Of NBFC


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About Setting UP Of NBFC

Non-banking financial incorporation (NBFC) are fast emerging as an important segment of Indian economy. NBFC offers almost everything as banks do, performing financial intermediation in a variety of ways, making loans, accepting deposits, and advances, leasing, hire purchase, etc. NBFC can raise funds from the public, directly or indirectly, and can freely lend them to ultimate spenders. The minimum tenure to accept deposits is 12 months and the maximum period of 60 months. NBFC advance loans to the various small wholesale and retail traders and self-employed persons. NBFC is very popular due to attractive interest rates on deposits.

The working and operations of NBFCs are regulated by the Reserve Bank of India (RBI) within the framework of the Reserve Bank of India Act. Section 45-IA provides that no NBFC shall commence or carry on the business of Non- Banking Financial Institution without obtaining a Certificate of Registration issued by the Reserve Bank of India.

Advantages

  • Provides loans and credit facilities to Public
  • Trading money market instruments
  • Funding private education & Business
  • Wealth management
  • Discounting services e.g. discounting of instruments
  • Underwrite stock and shares, TFCs and other obligations

Documents Required

  • Certified copy of up-to-date Memorandum and Articles of Association of the Company.
  • Banker’s Report in a sealed envelope.
  • Auditors report about receipt of minimum net owned fund.
  • A certificate of Chartered Accountant regarding details of group/associate/subsidiary/holding companies along with details of investments in other NBFCs as shown in the Proforma Balance Sheet

Types Of NBFC

  • Development finance institutions
  • Investment companies
  • Discount & guarantee houses
  • Corporate development companies
  • Venture capital companies
  • Leasing companies
  • House finance companies

Process

Company Registration

The first step is to form a new Company (Private Limited or Public Limited) under the Companies Act.

Minimum Net Owned Fund

NOF should be Rs. 200 Lac After the incorporation of a new Company in the form of Equity share capital. The Capital to be raised after incorporation of a company here should be Equity Share Capital and not Preference Share Capital.

The Opening Of A Bank Account

The amount which is received post incorporation of the company shall be deposited in a bank account as Fixed Deposit and its must be free from all aliens.

Business Operations

Application to RBI for Business Operations.

Certificate of Commencement of Business

RBI will conduct due diligence and will issue certificate of commencement of business.

Frequently Asked Questions

What are financial assets for NBFC?

A company which fulfils both these criteria will be registered as NBFC by RBI. Financial asset is a tangible liquid asset that derives value because of contractual claim of what it represents. Stocks, bonds, bank deposits, are examples of some financial assets

In other words, not all NBFCs registered with the Reserve Bank are entitled to accept deposits but only those that hold a deposit accepting Certificate of Registration can accept deposits. They can, however, accept deposits, only to the extent permissible.

NBFC and bank both are financial companies. But the major difference is unlike banks NBFC cannot issue self drawn cheques and demand draft. NBFC stands for non banking financial company as the name suggests NBFC is not a bank ,perform only lending functions to public and NBFC cannot accept deposits from public

The working and operations of NBFCs are regulated by the Reserve Bank of India (RBI) within the framework of the [[Reserve Bank of India Act, 1934]] (Chapter III-B) and the directions issued by it.

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