DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name of the staff : Smt M. L. Kameswari.
Designation : Sr.Lecturer in CCP.
Institute : Govt Polytechnic for Women,
Bheemunipatnam
Semester : VI semester.
Sub. Code : CCP 604(B)
Subject : Banking-II
Topic : Role of Non-Banking
Financial Institutions (5 to 6/18)
Sub-topic : Procedure for Formation of NBFC

Duration : 50 minutes
Teaching aids : PPTCCP-604(B)59 to 60 1
Objectives:

On the completion of this period you would be able

to
 Explain the procedure for the formation of NBFC

CCP-604(B)59 to 60 2
Recap

In the last class we discussed about

 The features of NBFC
 The functions of NBFC

CCP-604(B)59 to 60 3
HOW NBFC CAN BE FORMED ?

The NBFC business may be formed

 as a corporate body (or)
 as a private or public company (or)
 as a partnership firm.
 80% NBFC business is done by private
companies
 Hence formation of NBFC is as per private
company under Companies Act 1956

CCP-604(B)59 to 60 4
Formation of NBFC…

It is important to note that

 As far as formation of NBFC is concerned,
there are no special formalities or
procedures

CCP-604(B)59 to 60 5
Requirements for formation of a
Private Limited Company

 A Registered Business Name

 A Registered Office
 Shareholders
 Share Capital
 Memorandum of Association

CCP-604(B)59 to 60 6
Requirements for formation
of a
Private Limited Company
 Articles of Association
 Certificate of Incorporation
 Auditor
 Accounts
 Registers
 Company Seal etc

CCP-604(B)59 to 60 7
Procedure for formation of NBFC
in India

1. Filing the proposed name of company for

approval to the Registrar of Companies
(ROC);

2. Get the Memorandum and Articles of

Association vetted by the ROC and printed

CCP-604(B)59 to 60 8
Procedure for formation of NBFC in
India…

1. Make an application to the Superintendent

of Stamps or an authorized bank requesting
for stamping of the Memorandum of
Association and Articles of Association.

3. Present the required documents along with

the registration fee to the Registrar of
Companies to get the certificate of
incorporation

CCP-604(B)59 to 60 9
Requirements for formation of a
Private Limited Company…

2. Obtain a company seal

4. Visit the UTI Investors Services Limited

to obtain a Permanent Account Number

CCP-604(B)59 to 60 10
Requirements for formation of a
Private Limited Company…

7. Obtain a Tax Account Number for income

taxes deducted at source from the Assessing
Office in the Income Tax Department Register
under Shops and Establishment Act

8. Register for value added tax (VAT) before

the Sales Tax Officer of the ward in which the
company is located

CCP-604(B)59 to 60 11
Requirements for formation of a
Private Limited Company…

9. Register for Profession tax Register

with
Employees' Provident Fund Organization
Register with ESIC (medical insurance)

10. Filing for Government Approval before

RBI/FIPB for Foreigners and NRI's

CCP-604(B)59 to 60 12
Conditions to establish an NBFC

As per the RBI (Amendment) Act 1997

 It is obligatory for NBFC’s to apply to RBI for a
certificate of Registration
 They should have minimum of 25 lakhs net
owned funds
 The amount of net owned funds is changed to 2
crores since April 1999 for registration

CCP-604(B)59 to 60 13
Conditions to establish an NBFC…

 The registered NBFC’s are required to create

a reserve fund to which not less than 20% of
the net profit should be transferred

 NBFC have to maintain liquid assets in

specified securities on a daily basis

 RBI can direct NBFC’s on issues relating to

disclosures, prudential norms, Credit
Investment etc.CCP-604(B)59 to 60 14
RBI classification of a NBFC
 RBI classifies a NBFC based on
 The category of a financial company as defined in
Section 45 (i)(c) of the RBI Act
 The industrial classification code allotted to the
company by the Registrar of Companies
 RBI provisionally classifies the company under
one of the categories specified in the NBFC
Directory 1977

CCP-604(B)59 to 60 15
Quiz

1. Most of the NBFCs are doing business

as private companies

 True
 False

CCP-604(B)59 to 60 16
Quiz
1. Minimum number of shareholders
required to start a NBFC as private
company

a) Three
b) Two
c) Five
d) Four

CCP-604(B)59 to 60 17
Quiz

3. Issue of prospectus is necessary for

registration of NBFC as a private
company

 True
 False

CCP-604(B)59 to 60 18
Quiz

4. All NBFC Companies must have

company seal

 True
 False

CCP-604(B)59 to 60 19
Summary

In this period we discussed about

 The procedure for the formation of NBFC
 As a private company

CCP-604(B)59 to 60 20
Frequently Asked Questions
1. Explain the procedure for formation of NBFC.

CCP-604(B)59 to 60 21