NBFC

NONBANK FINANCIAL C O M PA N I E S (NBFCS),

ALSO KNOWN AS NONBANK FINANCIAL
INSTITUTIONS (NBFIS) ARE FINANCIAL
I N S T I T U T I O N S T H A T O F F E R VA R I O U S B A N K I N G
S E RV I C E S BUT DO NOT H AV E A BANKING
LICENSE.
REQUIREMENTS FOR REGISTRATION WITH
RBI-
T H E F U N D A M E N TA L R E Q U I R E M E N T S W H I C H A R E T O B E
F U L F I L L E D I N O R D E R T O A P P LY F O R N B F C L I C E N S E I N
T E R M S O F S E C T I O N - 4 5 - I A O F T H E R B I A C T, 1 9 3 4 :
1. T H E C O M PA N Y H A S T O B E R E G I S T E R E D U N D E R T H E
C O M PA N I E S A C T. T H AT I S T H E C O M PA N Y S H O U L D
E I T H E R B E A L I M I T E D C O M P A N Y O R A P R I VAT E
L I M I T E D C O M PA N Y ( P L C ) .

2. THE MINIMUM NET OWNED FUND* OF THE

C O M PA N Y M U S T B E R S . 2 C R O R E .
 NET OWNED FUND

Owned Fund = Paid-up equity capital,

+ Preference shares which are compulsorily convertible into equity,
+Free reserves, balance in share premium account
+Capital reserves representing surplus arising out of sale proceeds of asset
excluding reserves created by revaluation of asset,
(-) Accumulated balance of loss,
(-) Deferred revenue expenditure
(-) Other intangible assets

Net Owned Fund = Owned fund

(-) Amount of investments of such company in shares of its subsidiaries,
companies in the same group and all other NBFCs
(-) The book value of debentures, bonds, outstanding loans and advances
including hire purchase and lease finance made to and deposits with
subsidiaries and companies in the same group, to the extent it exceeds
10% of the owned fund.
REGISTRATION WITH RBI
FINANCIAL ORGANIZATIONS WITCH DO
NOT NEED A NBFC LICENSE:
O R G A N I S AT I O N S REASON- AV O I D I N G
DUALITY OF REGULATION.

1. Insurance Companies, 1. It is regulated by Insurance

Regulatory and Development
2. Housing Finance Companies, Authority.
3. Stock Broking Companies,
2. It is regulated by National Housing
4. Merchant Banking Bank.
Companies, 3. Organisation mentioned in 3,4 and 5
5. Venture Capital Companies, are regulated by SEBI
6. Companies that run Collective 4. Chit Fund Companies are regulated
Investment Schemes, by the respective State Governments 
7. Chit Fund Companies, 5.  Nidhi Companies are regulated by
MCA.
8. Nidhi Companies.
NBFCS ARE CATEGORIZED IN THE FOLLOWING MANNER-
1. Deposit Accepting NBFCs (NBFCs-D)
[Deposit Taking]
2. Non-Deposit NBFCs (NBFCs-ND)
[Non-Deposit Taking]
(a) Systematically Important
NBFCs-
ND (NBFCs-ND-SI)
(b) Others NBFCs-ND
3. by the kind of activity they conduct. Within
this broad categorization the different types
of NBFCs are as follows:
I. Asset Finance Company (AFC)
II. Investment Company (IC)
III. Loan Company (LC):
IV. Infrastructure Finance Company (IFC)
V. Systemically Important Core I
investment Company (CIC-ND-SI)
vi. Infrastructure Debt Fund: Non-
Bank Financial Company (IDF-NBFC)
vii. Non-Banking Financial Company - Micro
Finance Institution (NBFC-MFI)
viii. Non-Banking Financial Company –
Factors
NBFC-Factors)
Ix. NBFC- Non-Operative Financial Holding
Company (NOFHC)
SYSTEMATICALLY IMPORTANT NBFCS-ND
(NBFCS-ND-SI)

NBFCS WHOSE ASSET SIZE IS OF ₹ 500 CRORE OR

MORE AS PER LAST AUDITED BALANCE SHEET
A R E C O N S I D E R E D A S S Y S T E M I C A L LY I M P O R TA N T
NBFCS
ASSET FINANCE COMPANY (AFC)
• AN AFC IS A C O M PA N Y WHICH IS A FINANCIAL
I N S T I T U T I O N C A R RY I N G O N A S I T S P R I N C I PA L B U S I N E S S
THE FINANCING OF PHYSICAL ASSETS SUPPORTING
PRODUCTIVE/ECONOMIC, SUCH AS AUTOMOBILES,
TRACTORS, L AT H E MACHINES, CRANES, G E N E R AT O R
SETS, EARTH MOVING AND M AT E R I A L HANDLING
E QU I P ME NT, M O VI N G O N O WN P OW E R A N D G EN ER A L
PURPOSE INDUSTRIAL MACHINES.

• P R I N C I PA L B U S I N E S S F O R T H I S P U R P O S E I S D E F I N E D A S
A G G R E G AT E OF FINANCING REAL/PHYSICAL ASSETS
SUPPORTING ECONOMIC ACTIVITY AND INCOME ARISING
T H E R E F R O M I S N O T L E S S T H A N 6 0 % O F I T S T O TA L
A S S E T S A N D T O T A L I N C O M E R E S P E C T I V E LY.
INVESTMENT COMPANY

Investment Company means any company which is a

financial institution carrying on as its principal
business the acquisition of securities.
LOAN COMPANY

LC means any company which is a financial institution carrying on as

its principal business the providing of finance whether by making loans
or advances or otherwise for any activity other than its own but does
not include an Asset Finance Company.
INFRASTRUCTURE FINANCE
COMPANY
IFC IS A NON-BANKING FINANCE COMPANY
a) WHICH DEPLOYS AT LEAST 75 PER CENT OF
ITS TOTAL ASSETS IN INFRASTRUCTURE
LOANS,
b) HAS A MINIMUM NET OWNED FUNDS OF RS.
300 CRORE,
c) HAS A MINIMUM CREDIT RATING OF ‘A ‘OR
EQUIVALENT
d) AND A CRAR OF 15%.(CAPITAL TO RISK
(WEIGHTED) ASSETS RATIO)
SYSTEMICALLY IMPORTANT CORE INVESTMENT
COMPANY (CIC-ND)
CIC-ND-SI is an NBFC carrying on the business of acquisition of shares and securities
which satisfies the following conditions:-
(a) It holds not less than 90% of its Total Assets in the form of investment in equity
shares, preference shares, debt or loans in group companies;
(b) Its investments in the equity shares (including instruments compulsorily convertible
into equity shares within a period not exceeding 10 years from the date of issue) in
group companies constitutes not less than 60% of its Total Assets;
(c) It does not trade in its investments in shares, debt or loans in group companies except
through block sale for the purpose of dilution or disinvestment;
(d) It does not carry on any other financial activity referred to in Section 45 I(c) and 45
I(f) of the RBI act, 1934 except investment in bank deposits, money market
instruments, government securities, loans to and investments in debt issuances of
group companies or guarantees issued on behalf of group companies.
(e) Its asset size is ₹ 100 crore or above and
(f) It accepts public funds
INFRASTRUCTURE DEBT FUND: NON-
BANKING FINANCIAL COMPANY (IDF-
NBFC)
I D F - N B F C I S A C O M PA N Y R E G I S T E R E D A S
N B F C T O FA C I L I TAT E T H E F L O W O F L O N G
TERM DEBT INTO INFRASTRUCTURE
PROJECTS. IDF-NBFC RAISE RESOURCES
THROUGH ISSUE OF RUPEE OR DOLLAR
D E N O M I N AT E D B O N D S O F M I N I M U M 5 Y E A R
M A T U R I T Y. O N L Y I N F R A S T R U C T U R E F I N A N C E
C O M PA N I E S ( I F C ) C A N S P O N S O R I D F - N B F C S .
 NON-BANKING FINANCIAL COMPANY - MICRO
FINANCE INSTITUTION (NBFC-MFI)
NBFC-MFI is a non-deposit taking NBFC having not less than 85% of its assets in the nature of
qualifying assets which satisfy the following criteria:
a. Loan disbursed by an NBFC-MFI to a borrower with a rural household annual income not
exceeding ₹ 1,00,000 or urban and semi-urban household income not exceeding ₹ 1,60,000;
b. Loan amount does not exceed ₹ 50,000 in the first cycle and ₹ 1,00,000 in subsequent cycles;
c. Total indebtedness of the borrower does not exceed ₹ 1,00,000;
d. Tenure of the loan not to be less than 24 months for loan amount in excess of ₹ 15,000 with
prepayment without penalty;
e. Loan to be extended without collateral;
f. Aggregate amount of loans, given for income generation, is not less than 50 per cent of the total
loans given by the MFIs;
g. Loan is repayable on weekly, fortnightly or monthly instalments at the choice of the borrower
 NON-BANKING FINANCIAL COMPANY – FACTORS (NBFC-FACTORS

NBFC-Factor is a non-deposit taking NBFC engaged in the principal business of

factoring. The financial assets in the factoring business should constitute at least
50 percent of its total assets and its income derived from factoring business
should not be less than 50 percent of its gross income.
 MORTGAGE GUARANTEE COMPANIES (MGC)

MGC are financial institutions for which at least 90% of the business
turnover is mortgage guarantee business or at least 90% of the gross
income is from mortgage guarantee business and net owned fund is ₹
100 crore.
 NBFC- NON-OPERATIVE FINANCIAL HOLDING COMPANY (NOFHC)

NBFC- Non-Operative Financial Holding Company (NOFHC) is

financial institution through which promoter / promoter groups will be
permitted to set up a new bank .It’s a wholly-owned Non-Operative
Financial Holding Company (NOFHC) which will hold the bank as well
as all other financial services companies regulated by RBI or other
financial sector regulators, to the extent permissible under the
applicable regulatory prescriptions.
MANDATORY RETURNS TO BE FILED BY NBFC

Return Time limit New Return Introduced Explanation

NBS -1 / Upto 15 April / 15 July / DNBS – 01 - RBI has
DNBS – 01 15 Oct. / 15 Jan introduced the new XBRL
return to be filed in place of
form NBS 1.
For FY 2019-20 both NBS 1
and DNBS – 01 XBRL needs to
be filed. For FY 2020-21 and
onwards only DNBS – 01
XBRL return is required to be
filed.
Return on Financial
indicators by NBFC
accepting or
holding deposit to be
filed within 15 days of
closure of the quarter

NBS 2 / Upto 15 April / 15 July / DNBS – 03 - RBI has Return on Prudential

DNBS – 03 15 Oct. / 15 Jan introduced the new XBRL norms to be filed by
return to be filed in place of deposit taking NBFC
form NBS 2 NBS 3 and NBS 7. within 15 days of closure
For FY 2019-20 both NBS 2 / 3 of the quarter
/7 DNBS – 03 XBRL needs to
be filed.For FY 2020-21 and
onwards only DNBS – 03
XBRL return is required to be
filed.
Return Time limit New Return Introduced Explanation

NBS 3 / Upto 15 April / 15 DNBS – 03 - RBI has Return on liquid assets to

DNBS – 03 July / 15 Oct. / 15 introduced the new
Jan XBRL return to be filed be filed by deposit taking
in place of form NBS 2 NBFC within 15 days of
NBS 3 and NBS 7.
For FY 2019-20 both closure of the quarter
NBS 2 / 3 /7 DNBS –
03 XBRL needs to be
NBS 7 / Upto 15 April / 15 filed. For FY 2020-21 Return on Prudential norms to
DNBS – 03 July / 15 Oct. / 15 and onwards only be filed by Non deposit taking
Jan DNBS – 03 XBRL systematically important
return is required to be NBFC to be filed within 15
filed. days of closure of the quarter

ALM Return Upto 30 April / 30 Every Deposit taking NBFC

October holding public deposit of
more than Rs 20 Cr. Or Asset
size of more than 100 Cr.
Needs to file the ALM Return
within one month of each half
of financial year
Return Time limit New Return Introduced Explanation

NBS 8 / Upto 30 May every Every Non Deposit

taking NBFC having
DNBS – 02 year asset size of INR 100
DNBS – 02 - RBI has Cr. – 500 Cr. Is required
introduced the new to file this return every
XBRL return to be filed year within 60 days of
in place of form NBS 8 closure of financial year
and NBS 9.
For FY 2019-20 both
NBS 8 / 9 and DNBS –
02 XBRL needs to be
filed For FY 2020-21
and onwards only
DNBS – 02 XBRL
return is required to be
filed.

NBS 9 / Upto 30 May every year Every Non Deposit

DNBS – 02 taking NBFC having
asset size upto INR 100
Cr. Is required to file
this return every year
within 60 days of
closure of financial year
Overseas Upto 15 April / Overseas Return to be
Investment 15 July / 15 Oct. / Investment submitted by
Return/ 15 Jan Return to be NBFCs having
DNBS013 filed in XBRL overseas
system through investment.
DNBS013

Statutory Auditor 30 April Return for SAC report

Certificate/ Statutory required to filed in
DNBS010 Auditor to be XBRL system on
filed in XBRL annually basis.
system through
Statutory
Auditor
Module.
REQUIREMENT OF PRIOR APPROVAL OF RESERVE BANK

1. Any takeover or acquisition of control of an NBFC, which may or may not result in
change of management;
2. Any change in the shareholding of an NBFC, including progressive increases over
time, which would result in acquisition/ transfer of shareholding of 26 per cent or
more of the paid up equity capital of the NBFC.( Approval not required in case of,
buyback of shares/ reduction in capital )
3. Any change in the management of the NBFC which would result in change in more
than 30 per cent of the directors, excluding independent directors. Prior approval
would not be required for those directors who get re-elected on retirement by rotation.
 APPLICATION FOR PRIOR APPROVAL
(i) NBFCs shall submit an application, in the company letter head, for obtaining prior approval
of the Bank under paragraph 2, along with the following documents:
a) Information about the proposed directors/ shareholders as per the Annex;
b) Sources of funds of the proposed shareholders acquiring the shares in the NBFC;
c) Declaration by the proposed directors/ shareholders that they are not associated with any
unincorporated body that is accepting deposits;
d) Declaration by the proposed directors/ shareholders that they are not associated with any
company, the application for Certificate of Registration (CoR) of which has been rejected
by the Reserve Bank;
f) Declaration by the proposed directors/ shareholders that there is no criminal case, including
for offence under section 138 of the Negotiable Instruments Act, against them; and
g) Bankers’ Report on the proposed directors/ shareholders.
REQUIREMENT OF PRIOR PUBLIC NOTICE ABOUT CHANGE IN
CONTROL/ MANAGEMENT
i. A public notice of at least 30 days shall be given before effecting the sale of, or
transfer of the ownership by sale of shares, or transfer of control, whether with or
without sale of shares. Such public notice shall be given by the NBFCs and also by
the other party or jointly by the parties concerned, after obtaining the prior
permission of the Reserve Bank.

ii. The public notice shall indicate the intention to sell or transfer ownership/ control, the
particulars of transferee and the reasons for such sale or transfer of ownership/
control. The notice shall be published in at least one leading national and in one
leading local (covering the place of registered office) vernacular newspaper.