October 23, 2021

FINANCIAL NON-BANKING COMPANY(NBFC): Important Things to know Registration

FINANCIAL NON-BANKING COMPANY(NBFC) Important Things to know Registration

FINANCIAL NON-BANKING COMPANY:

 An NBFC is a company registered under the Companies Act of 1956 that engages in the business of loans and advances, the acquisition of shares/stocks/debentures/bonds/securities issued by the government or a local authority, or other marketable securities of a similar nature, insurance, leasing, hire-purchase, and chit business, but not an institution whose primary business is agriculture (other than securities).  An NBFC-RNBC is a non-banking institution whose primary activity is to receive deposits under any scheme or arrangement by way of contributions or in some other method (Residuary Non-banking Company).

Top NBFCs in India provide comparable functions to banks. There are, however, some distinctions between the two. NBFCs, for example, cannot accept demand deposits, unlike banks. NBFCs aren’t part of the payment and settlement system, so they can’t write checks drawn on themselves. The Deposit Insurance and Credit Guarantee Corporation’s deposit insurance provision is not available to NBFC vs bank depositors.

What makes NBFCs different from traditional banks?

  • Only the public deposit, not the demand deposit, can be accepted by an NBFC.
  • Insurance or credit facilities are not guaranteed by an NBFC.
  • An NBFC is unable to write checks drawn on itself. Because NBFCs are not a part of the settlement or payment systems, this is the case.

In 2021, why is NBFC the best option for Fintech Startups?

In India, the fixed cost of running a traditional bank is extremely high. on the other hand, Starting and maintaining an NBFC  is incredibly cost effective and allows you to take advantage of all of the bank’s features.

NBFC opportunity areas are places on the periphery of cities where banks are unable to provide full-service banking. In addition, in comparison to NBFCs, the traditional bank’s loan application process is slower and entails more paperwork. Credit decisions in NBFCs take less time, which is a significant advantage when compared to bank loans.

NBFC Registration Guidelines and Rules

In India, there are three types of Main NBFCs: Asset Finance Companies, Loan Companies, and Investment Companies. In India, such NBFCs have benefited a large number of entrepreneurs, business owners, professionals, firms, institutions, industrialists, and investors from many spheres of trade and industry. As a result, our internationally renowned legal firm situated in India has chosen to provide complete and competent support related to nbfc registration in India.Any company registered under the Indian Companies Act of 1956 and doing business in the above-mentioned sectors should apply to the Reserve Bank of India for nbfc registration (RBI). The Certificate of NBFC Registration is required if the financial assets involved in the company’s activity exceed 50% of the total capital asset. A company, for example, must now have a minimum capital fund of Rs.2 crore (as raised from April 1999). The aspirant company must submit the prescribed nbfc registration form to RBI, along with all other required documents and attachments (in duplicate), for a thorough and mature review by RBI. If the requirements indicated in section 45-IA of the RBI Act of 1934 are met, the RBI will provide the necessary certificate of nbfc registration to the applicant company.

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