What's The Process To Start A Non-Banking Financial Company?

Starting a Non-Banking Financial Company (NBFC) in India

1. Company Incorporation: Start by incorporating a company under the Companies Act, 2013, opting for a suitable structure like a private limited company to function as the NBFC.

2. Minimum Capital Requirement: Verify the company meets the minimum capital needed for your chosen NBFC category, as requirements vary depending on the type.

3. Minimum Net Owned Funds (NOF): Calculate and uphold the minimum Net Owned Funds (NOF) as per RBI guidelines, a crucial criterion for NBFC registration.

4. Directors and Management: Appoint directors for the NBFC who meet RBI's fit and proper criteria, ensuring the management team includes individuals with pertinent experience in financial services.

5. Corporate Governance: Institute a strong corporate governance framework aligned with regulations, incorporating essential committees such as audit and risk management committees.

6. Business Plan: Craft a comprehensive business plan detailing the proposed NBFC's activities, and operations, and specifying the target market, financial products, and services.

7. Submit Application to RBI: Submit the registration application to the RBI Regional Office through the online COSMOS platform for NBFC approval.

8. Documents and Information: Submit the NBFC registration application with necessary documents, including incorporation certificate, business plan, and director details.

9. Application Fee: Submit the application fee, varying by NBFC type, along with the registration application.

10. Pre-Commencement Compliance: Once the RBI grants approval, ensure compliance with pre-commencement conditions, including the submission of a certificate from statutory auditors.

11. Post-Approval Compliance: Adhere to post-approval conditions from the RBI, encompassing capital adequacy, regulatory reporting, and prudential norms.

12. Regular Reporting: Submit required reports to the RBI per regulatory guidelines, covering financial statements, risk-based supervision reports, and other necessary disclosures.

13. Risk Management Systems: Implement robust risk management systems and internal controls to ensure the financial stability and risk mitigation of the NBFC.

14. Compliance with Regulatory Changes: Stay updated on regulatory changes and ensure ongoing compliance with the evolving regulatory framework for NBFCs.