The non-banking financial company is companies which provide financial services similar to what a bank provides but without holding any banking license. NBFC’s primarily deal in the acquisition of stocks, debenture, and securities issued by the government or local authority they also deal in the business of advances and loans.
Trading in securities & shares in capital market also falls under the definition of the NBFC, and therefore require prior registration of the company as NBFC with RBI and company act.
Related: Types of NBFC in India
Companies act newly inserted section 2(39) which defines financial institutions .this definition includes banks and any financial institutions defined by RBI. So, therefore, reading section 45-I of RBI act together with section 2(39) of companies act includes NBFC.
The minimum net owned funds of the company prior to registration should be 2 crores.
The company should have clean civil records.
At least one of the directors appointed should have NBFC background or a senior banker should be appointed as a full-time director of the company.
The applicant desirous of registering their company as NBFC needs to attain registration under section 3 of companies’ act and also need to receive the certificate of registration from RBI.
NBFC registration procedure begins with the approval of the proposed name of the company.
A Company while registering itself as NBFC needs to mention in the memorandum of association that the company deals in the acquisition of shares, stocks, debentures and they also deal in the insurance business, hire-purchase and receiving deposits.
The company also needs to mention in the Inc-1, the objective of the company as financing.
Every company before starting as an NBFC needs to attain the certificate of registration from RBI. If not done so a heavy amount of fine is levied on the companies.
After incorporation of the company as the public limited company or private limited company under section 3 of companies’ act, 2013 or companies act 1956 they can register their company with MCA as NBFC without prior approval from RBI.
With recent amendment of the companies act, they brought NBFC under the purview of the financial institution under companies’ act 2013 and therefore now NBFC companies have got certain privilege’s similar to that of commercial banks. Any company operating as an NBFC needs to register themselves under the companies act and obtain the certificate of registration from RBI. If any company doesn’t register itself and start operating as NBFC, a heavy amount of fine is levied and in certain cases leads to the minimum imprisonment of 6 months which can be extended.