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A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013 that provides financial services - lending, investment, leasing, hire purchase, microfinance, and more - but does not hold a banking licence. NBFCs have become the backbone of credit access for MSMEs, individuals in tier 2-3 cities, and sectors not traditionally served by banks. Over 10,000 registered NBFCs operate in India today, collectively managing assets exceeding Rs 65 lakh crore.
| Feature | Bank | NBFC |
|---|---|---|
| Accept demand deposits | Yes | No |
| Part of payment system | Yes | No |
| Deposit Insurance (DICGC) | Available | Not available |
Types of NBFCs and Minimum Net Owned Fund
| Type | Primary Activity | Min. Net Owned Fund |
|---|---|---|
| NBFC-ICC (Investment and Credit Company) | General lending, investment | Rs 10 Crore |
| NBFC-MFI (Microfinance Institution) | Small loans to low-income borrowers | Rs 5 Crore |
| NBFC-P2P (Peer-to-Peer Lending) | Online marketplace connecting lenders and borrowers | Rs 2 Crore |
| NBFC-HFC (Housing Finance Company) | Housing loans (regulated by NHB) | Rs 20 Crore |
Eligibility for NBFC Registration
- Must be a company incorporated under the Companies Act, 2013
- Minimum Net Owned Fund (NOF) of Rs 10 crore for NBFC-ICC
- At least 51% of total assets must be financial assets
- At least 51% of gross income must be from financial assets
- Directors must meet fit-and-proper criteria - no conviction for moral turpitude, adequate financial sector experience preferred
- Clean credit bureau records for the company and its directors
RBI Registration Process
Incorporate a Private or Public Limited Company with financial services as main objects in the MoA. Ensure paid-up capital is at least equal to the minimum NOF requirement.
File the online application on RBI COSMOS portal for NBFC registration. Upload all required documents and submit the application.
After online submission, submit the physical application with supporting documents to the Regional Office of the Department of Regulation, RBI, under whose jurisdiction the registered office falls.
RBI reviews the application - this can take 3-6 months. Once satisfied, RBI issues a Certificate of Registration (CoR). The CoR number must be displayed on all communications, websites, and lending agreements.
Section 45-IA of the RBI Act makes it a criminal offence to carry on the business of an NBFC without a Certificate of Registration from RBI. This includes online lending apps and fintech lending platforms. Penalties include imprisonment up to 5 years and fine up to Rs 1 lakh plus daily fine for continuing violation.
Establishing an NBFC requires substantial capital, regulatory preparation, and ongoing compliance. Legal Chanakya provides complete NBFC registration advisory - from initial feasibility assessment and company incorporation to RBI application preparation, business plan drafting, and post-registration compliance management.
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