New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

RBI Guidelines for Registration of NBFI/NBFC company

Dated:- 28-7-2015 - FOREWORD The Reserve Bank of India is entrusted with the responsibility of regulating and supervising the Non-Banking Financial Companies by virtue of powers vested in Chapter III B of the Reserve Bank of India Act, 1934. The regulatory and supervisory objective, is to: a) ensure healthy growth of the financial companies; b) ensure that these companies function as a part of the financial system within the policy framework, in such a manner that their existence and functioning .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rifications in the form of questions and answers, is being brought out by the Reserve Bank of India (Department of Non-Banking Supervision) with the hope that it will provide better understanding of the regulatory framework. The information given in the FAQ is of general nature for the benefit of depositors/public and the clarifications given do not substitute the extant regulatory directions/instructions issued by the Bank to the NBFCs. Frequently Asked Questions on NBFCs 1. What is a Non-Banki .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company). 2. NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ? N .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

In terms of Section 45-IA of the RBI Act, 1934, no Non-banking Financial company can commence or carry on business of a non-banking financial institution without a) obtaining a certificate of registration from the Bank and without having a Net Owned Funds of ₹ 25 lakhs (Rs two crore since April 1999). However, in terms of the powers given to the Bank. to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

NBFCs registered with RBI? NBFCs are categorized a) in terms of the type of liabilities into Deposit and Non-Deposit accepting NBFCs, b) non deposit taking NBFCs by their size into systemically important and other non-deposit holding companies (NBFC-NDSI and NBFC-ND) and c) by the kind of activity they conduct. Within this broad categorization the different types of NBFCs are as follows: Asset Finance Company(AFC) : An AFC is a company which is a financial institution carrying on as its principa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

IC) : IC means any company which is a financial institution carrying on as its principal business the acquisition of securities, Loan Company (LC): 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): IFC is a non-banking finance company a) which deploys at least 75 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n 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 45I(c) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

FC raise resources through issue of Rupee or Dollar denominated bonds of minimum 5 year maturity. Only Infrastructure Finance Companies (IFC) can sponsor IDF-NBFCs. 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 ₹ 60,000 or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 75 percent of its total assets and its income derived from factoring business should not be less than 75 percent of its gross income. 5. Wha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rs, CICs is indicated separately in the FAQs on specialized NBFCs) 6. What is the procedure for application to the Reserve Bank for Registration? The applicant company is required to apply online and submit a physical copy of the application along with the necessary documents to the Regional Office of the Reserve Bank of India. The application can be submitted online by accessing RBI s secured website https://cosmos.rbi.org.in . At this stage, the applicant company will not need to log on to the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dentification Particulars in the Excel application form. The company would then get a Company Application Reference Number for the CoR application filed on-line. Thereafter, the company has to submit the hard copy of the application form (indicating the online Company Application Reference Number, along with the supporting documents, to the concerned Regional Office. The company can then check the status of the application from the above mentioned secure address, by keying in the acknowledgement .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n as NBFCs. 8. Where can one find list of Registered NBFCs and instructions issued to NBFCs? The list of registered NBFCs is available on the web site of Reserve Bank of India and can be viewed at www.rbi.org.in → Sitemap → NBFC List. The instructions issued to NBFCs from time to time are also hosted at www.rbi.org.in → Sitemap → NBFC List. → NBFC Notifications, besides, being issued through Official Gazette notifications and press releases. 9. Can all NBFCs accept depos .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h the prudential norms can accept public deposits as follows: Category of NBFC having minimum NOF of ₹ 200 lakhs Ceiling on public deposit AFC* maintaining CRAR of 15% without credit rating 1.5 times of NOF or ₹ 10 crore whichever is less AFC with CRAR of 12% and having minimum investment grade credit rating 4 times of NOF LC/IC** with CRAR of 15% and having minimum investment grade credit rating 1.5 times of NOF * AFC = Asset Finance Company ** LC/IC = Loan company/Investment Compan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

imum investment grade credit rating Equal to NOF Presently, the maximum rate of interest an NBFC can offer is 12.5%. The interest may be paid or compounded at rests not shorter than monthly rests The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand. 11. What are the salient features of NBFCs regulations which the depositor may note at the time of investment? Some of the important r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es or any other additional benefit to the depositors. NBFCs (except certain AFCs) should have minimum investment grade credit rating. The deposits with NBFCs are not insured. The repayment of deposits by NBFCs is not guaranteed by RBI. Certain mandatory disclosures are to be made about the company in the Application Form issued by the company soliciting deposits. 12. What is deposit and public deposit ? Is it defined anywhere? The term deposit is defined under Section 45 I(bb) of the RBI Act, 19 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

posit, dealership deposit, earnest money, advance against orders for goods, properties or services; (iv) amount received by a registered money lender other than a body corporate; (v) amount received by way of subscriptions in respect of a Chit . Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptance of Public Deposits ( Reserve Bank) Directions, 1998 defines a public deposit as a deposit as defined under Section 45 I(bb) of the RBI Act, 1934 and further excludes the following: (i) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

calls in advance if such amount is not repayable to the members under the articles of association of the company; (v) amount received from shareholders by private company; (vi) amount received from directors or relative of the director of an NBFC; (vii) amount raised by issue of bonds or debentures secured by mortgage of any immovable property or other asset of the company subject to conditions; (viii) the amount brought in by the promoters by way of unsecured loan; (ix) amount received from a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an make independent decision. 13. Are Secured debentures treated as Public Deposit? If not who regulates them? Debentures secured by the mortgage of any immovable property of the company or by any other asset or with an option to convert them into shares in the company, if the amount raised does not exceed the market value of the said immovable property or other assets, are excluded from the definition of Public Deposit in terms of Non-Banking Financial Companies Acceptance of Public Deposits (R .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rs of NBFCs? Yes, nomination facility is available to the depositors of NBFCs. The Rules for nomination facility are provided for in section 45QB of the Reserve Bank of India Act, 1934. Non-Banking Financial Companies have been advised to adopt the Banking Companies (Nomination) Rules, 1985 made under Section 45ZA of the Banking Regulation Act, 1949. Accordingly, depositor/s of NBFCs are permitted to nominate one person to whom the NBFC can return the deposit in the event of the death of the dep .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iving details such as the name of the depositor/s, the date of deposit, the amount in words and figures, rate of interest payable and the date of repayment of matured deposit along with the maturity amount. Depositor/s should insist on the above and also ensure that the receipt is duly signed and stamped by an officer authorised by the company on its behalf. In the case of brokers/agents etc collecting public deposits on behalf of NBFCs, the depositors should satisfy themselves that the brokers/ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

accepts deposit? Is it true? Who rates them? An unrated NBFC, except certain Asset Finance companies (AFC), cannot accept public deposits. An exception is made in case of unrated AFC companies with CRAR of 15% which can accept public deposit without having a credit rating up to a certain ceiling depending upon its Net Owned Funds (refer answer to Q 10). NBFC may get itself rated by any of the five rating agencies namely, CRISIL, CARE, ICRA and FITCH, Ratings India Pvt. Ltd and Brickwork Ratings .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o AA and AAA- is not equivalent to AAA. 19. Can an NBFC which is yet to be rated accept public deposit? No, an NBFC cannot accept deposit without rating (except an Asset Finance Company complying with prudential norms and having CRAR of 15%, as explained above in answer to Q 10). 20. When a company s rating is downgraded, does it have to bring down its level of public deposits immediately or over a period of time? If rating of an NBFC is downgraded to below minimum investment grade rating, it ha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

epayment of deposit, the depositor can approach Company Law Board or Consumer Forum or file a civil suit in a court of law to recover the deposits. 22. What is the role of Company Law Board in protecting the interest of depositors? How can one approach it? When an NBFC fails to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board (CLB) either on its own motion or on an application from the depositor, directs by order the Non-Banking .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fee. 23. Can you give the addresses of the various benches of the Company Law Board (CLB) indicating their respective jurisdiction? The details of addresses and territorial jurisdiction of the bench officers of CLB are as under: ADDRESSES OF REGIONAL COMPANY LAW BOARD S. No. Region Jurisdiction Telephone No. Fax No. 1. Company Law Board Principal Bench Paryavaran Bhawan B-Block, 3rd Floor C.G.O. Complex Lodhi Road, New Delhi - 110 003 All States & Union Territories 011 - 24366126 011- 24363 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Pradesh, Assam, Bihar, Manipur, Meghalaya, Nagaland, Orissa, Sikkim, Tripura, West Bengal, Jharkhand and Union Territories of Andaman and Nicobar Island and Mizoram. 033 - 22486330 033 - 22621760 4. Company Law Board Mumbai Bench N.T.C. House, 2nd Floor, 15 Narottam Morarjee Marg, Ballard Estate, Mumbai - 400 038 States of Goa, Gujarat, Madhya Pradesh, Maharashtra, Chhattisgarh and (Union Territories of Dadra and Nagar Haveli and Daman and Diu) 022 - 22619636/ 022 - 22611456 022 - 22619636 5. C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sonable opportunity of being heard in a winding up petition. The liquidator performs the duties of winding up of the company and such duties in reference thereto as the court may impose. Where the court has appointed an official liquidator or provisional liquidator, he becomes custodian of the property of the company and runs day-to-day affairs of the company. He has to draw up a statement of affairs of the company in prescribed form containing particulars of assets of the company, its debts and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

erefore, the investors/depositors should file the claims within due time as per such notices of the liquidator. The Reserve Bank also provides assistance to the depositors in furnishing addresses of the official liquidator. 25. The Consumer Court plays useful role in attending to depositors problems. Can one approach Consumer Forum, Civil Court, CLB simultaneously? Yes, a depositor can approach any or all of the redressal authorities i.e consumer forum, court or CLB. 26. Is there an Ombudsman fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and contact details have to be mandatorily displayed in the premises of the NBFCs. The grievance can be taken up with the Grievance Redressal Officer. In case the complainant is not satisfied with the settlement of the complaint by the Grievance Redressal Officer of the NBFC, he/she may approach the nearest office of the Reserve Bank of India with the complaint. The details of the Office of the Reserve Bank has also to be mandatorily displayed in the premises of the NBFC. 27. What are various pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

unquoted shares, loan to value (LTV) ratio for NBFCs predominantly engaged in business of lending against gold jewellery, besides others. Deposit accepting NBFCs have also to comply with the statutory liquidity requirements. Details of the prudential regulations applicable to NBFC holding deposits and those not holding deposits is available in the DNBS section of master Circulars in the RBI website www.rbi.org.in → sitemap → Master Circulars. 28. Please explainthe terms owned fund and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rrived at above, minus the amount of investments of such company in shares of its subsidiaries, companies in the same group and all other NBFCs and 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. 29. What are the responsibilities of the NBFCs accepting/holding public deposits with regard to submission of Returns and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sits as and when the claims arise; Quarterly Return on prudential norms-NBS 2; Quarterly Return on liquid assets-NBS 3; Annual return of critical parameters by a rejected company holding public deposits - NBS4 Half-yearly ALM Returns by companies having public deposits of ₹ 20 crore and above or asset size of ₹ 100 crore and above irrespective of the size of deposits holding Monthly return on exposure to capital market by deposit taking NBFC with total assets of ₹ 100 crore and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e company (iii) Asset- Liability Management (ALM) returns: (iv) Statement of short term dynamic liquidity in format ALM [NBS-ALM1] -Monthly, (v) Statement of structural liquidity in format ALM [NBS-ALM2] Half Yearly (vi) Statement of Interest Rate Sensitivity in format ALM -[NBS-ALM3], Half yearly B. The non deposit taking NBFCs having assets of more than ₹ 50 crore and above but less than ₹ 100 crore are required to submit Quarterly return on important financial parameters of the co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ith RBI and also make sure that they continue to be eligible to retain the Registration. Further, all NBFCs (including non-deposit taking) should submit a certificate from their Statutory Auditors every year to the effect that they continue to undertake the business of NBFI requiring holding of CoR under Section 45-IA of the RBI Act, 1934 NBFCs are also required to furnish the information in respect of any change in the composition of its Board of Directors, address of the company and its Direct .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

le to repay the matured public deposits on receipt of a claim from the depositor. Please elaborate the provisions. As per Reserve Bank s Directions, overdue interest is payable to the depositors in case the company has delayed the repayment of matured deposits, and such interest is payable from the date of receipt of such claim by the company or the date of maturity of the deposit whichever is later, till the date of actual payment. If the depositor has lodged his claim after the date of maturit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 wherein it is specified that NBFCs cannot grant any loan against a public deposit or make premature repayment of a public deposit within a period of three months (lock-in period) from the date of its acceptance. However, in the event of death of a depositor, the company may, even within the lock-in period, repay the deposit at the request of the joint holders with survivor clause / nominee / legal heir only against submi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sitor or repayment of tiny deposits i.e. up to ₹ 10000/- subject to lock in period of 3 months in the latter case. 33. What is the liquid assets requirement for the deposit taking companies? Where are these assets kept? Do depositors have any claims on them? In terms of Section 45-IB of the RBI Act, 1934, the minimum level of liquid assets to be maintained by NBFCs is 15 per cent of public deposits outstanding as on the last working day of the second preceding quarter. Of the 15%, NBFCs ar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

/ Stock Holding Corporation of India Limited (SHICL). In case of Government guaranteed bonds the same may be kept in dematerialised form with SCB/SHCIL or in a dematerialised account with depositories [National Securities Depository Ltd. (NSDL)/Central Depository Services (India) Ltd. (CDSL)] through a depository participant registered with Securities & Exchange Board of India (SEBI). However in case there are Government bonds which are in physical form the same may be kept in safe custody .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lised form only. The liquid assets maintained as above are to be utilised for payment of claims of depositors. However, deposits being unsecured in nature, depositors do not have direct claim on liquid assets. 34. Please tell us something about the companies which are NBFCs, but are exempted from registration? Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, Nidhi Companies, Ins .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

it Fund Companies are regulated by the respective State Governments and Nidhi Companies are regulated by Ministry of Corporate Affairs, Government of India. It may also be mentioned that Mortgage Guarantee Companies have been notified as Non-Banking Financial Companies under Section 45 I(f)(iii) of the RBI Act, 1934. 35. There are some entities (not companies) which carry on activities like that of NBFCs. Are they allowed to take deposits? Who regulates them? Any person who is an individual or a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mpany and has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner and not being Investment, Asset Financing, Loan Company. These companies are required to maintain investments as per directions of RBI, in addition to liquid assets. The functioning of these companies is different from those of NBFCs in terms of method of mobilization of deposits and requirement of deployment of depositors' funds as per Directions. Besides, Prudential Nor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f highly liquid and secure instruments viz. Central/State Government securities, fixed deposits with scheduled commercial banks (SCB), Certificate of deposits of SCB/FIs, units of Mutual Funds, etc. to the extent of 100 per cent of their deposit liability. 38. Can RNBC forfeit deposit if deposit installments are not paid regularly or discontinued? No Residuary Non-Banking Company shall forfeit any amount deposited by the depositor, or any interest, premium, bonus or other advantage accrued there .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ily deposit scheme. Further, a RNBC can accept deposits for a minimum period of 12 months and maximum period of 84 months from the date of receipt of such deposit. They cannot accept deposits repayable on demand. 40. There are some companies like Multi-Level Marketing companies, Chit funds etc. Do they come under the purview of RBI? No, Multi-Level Marketing companies, Direct Selling Companies, Online Selling Companies don t fall under the purview of RBI. Activities of these companies fall under .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l deposit acceptance activities of UIBs? Unincorporated bodies (UIBs) include an individual, a firm or an unincorporated association of individuals. In terms of provision of section 45S of RBI act, these entities are prohibited from accepting any deposit. The state government has to play a proactive role in arresting the illegal activities of such entities to protect interests of depositors/investors. UIBs do not come under the regulatory domain of RBI. Whenever RBI receives any complaints again .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e various investors awareness programmes in various districts of the country, keeps close liaison with the law enforcing agencies (Economic Offences Wing). 42. Companies registered with MCA but not registered with RBI as NBFCs also sometimes default in repayment of deposit/amounts invested with them? What is the recourse available to the investors in such an event? Does RBI have any role to play in such cases? Companies registered with MCA but not required to be registered with RBI as NBFC are n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version