An NBFC is a company that provides financial services after obtaining RBI approval. To get NBFC registration, the company must meet RBI eligibility criteria, maintain the required Net Owned Fund (NOF), and submit necessary documents. RBI reviews the company structure, promoters, directors and business model before granting the Certificate of Registration (CoR).
What is NBFC Registration?
A Non-Banking Financial Company (NBFC) is a company that provides financial services such as loans, credit facilities, investment services and other permitted financial activities without operating as a traditional bank. NBFCs are regulated entities that work under the supervision of the Reserve Bank of India (RBI).
A company that wants to start NBFC activities must obtain a Certificate of Registration (CoR) from RBI before carrying out regulated financial business. The company must fulfil RBI requirements, maintain the required Net Owned Fund (NOF) and submit the necessary documents for registration.
The regulatory framework for NBFCs is governed by the Reserve Bank of India Act, 1934 and various RBI guidelines issued from time to time. During the registration process, RBI reviews important aspects of the company, including its business model, promoters, directors, financial structure and compliance framework.
Unlike banks, NBFCs cannot perform all banking activities. For example, NBFCs cannot issue cheques drawn on themselves and cannot accept certain types of deposits like traditional banks. However, they can provide lending, financing and investment services according to the category approved by RBI.
NBFCs play an important role in India's financial sector by providing credit support to individuals, small businesses, MSMEs, startups and other organisations. Companies planning to enter the financial services sector generally begin with Private Limited Company Registration and then apply for the appropriate RBI approval based on their proposed activities.
Why Start an NBFC Business in India?
India has witnessed significant growth in the demand for credit facilities due to business expansion, increasing financial inclusion and the growth of digital financial services. An NBFC structure allows companies to establish a regulated financial business with defined operational requirements and compliance obligations under RBI guidelines.
Businesses generally explore NBFC registration for activities such as:
- Providing loans to individuals and businesses
- Financing MSMEs and small enterprises
- Developing specialised credit products
- Operating permitted digital lending models
- Offering microfinance and financial inclusion solutions
- Providing investment and financing-related services
An NBFC enables companies to offer financial products and services based on their approved business category while following the regulatory framework prescribed by RBI.
However, NBFC operations require continuous compliance with regulatory requirements, including periodic reporting, customer protection measures, KYC compliance, risk management practices and financial reporting obligations.
Companies must also maintain proper corporate records and complete statutory filings after incorporation through services such as ROC Compliance Filing.
Types of NBFC Registration in India
RBI approval requirements vary depending on the selected NBFC category and proposed financial activities. Each NBFC category has different eligibility requirements, business scope and compliance obligations prescribed by RBI.
Some common types of NBFC registration in India are:
1. NBFC Investment and Credit Company (NBFC-ICC)
NBFC-ICC is one of the most commonly used categories for companies planning to start lending activities.
This category generally allows companies to provide services such as:
- Providing loans and advances
- Offering credit facilities
- Investing in permitted securities
Companies planning general lending business usually consider NBFC-ICC registration based on their proposed activities, customer segment and financial model.
Before applying, the company should prepare a clear business plan covering lending strategy, target customers, risk management process and operational structure.
2. NBFC Micro Finance Institution (NBFC-MFI)
An NBFC-MFI is a specialised NBFC category that provides small-value loans to eligible borrowers, mainly for financial inclusion purposes.
This category requires compliance with specific RBI guidelines related to:
- Borrower eligibility criteria
- Loan limits
- Interest rates and charges
- Loan recovery practices
- Customer protection measures
Companies planning to provide microfinance services need to establish suitable policies and systems before applying for NBFC-MFI registration.
3. NBFC Peer-to-Peer Lending Platform (NBFC-P2P)
An NBFC-P2P platform works as an online marketplace that connects lenders and borrowers through a technology-based platform.
Companies applying under this category need to maintain a proper technology infrastructure and compliance framework, including:
- Customer onboarding process
- Platform operations
- Transaction management
- Risk disclosures
- Data protection measures
4. NBFC Factor
An NBFC Factor provides factoring services, where businesses can receive funds against their unpaid invoices or trade receivables. This model helps businesses improve cash flow by converting pending payments into immediate financial support. Companies planning to enter factoring activities must follow applicable RBI regulations and maintain proper systems for managing receivables and financial transactions.
Eligibility Requirements for NBFC Registration
Before applying for an NBFC Certificate of Registration (CoR), a company must fulfil the eligibility conditions prescribed by the Reserve Bank of India (RBI). RBI reviews the company structure, financial position, business plan, promoters and directors before approving the application.
1. Company Incorporation Requirement
The applicant must be incorporated as a company under the Companies Act. The company should have:
- Certificate of Incorporation
- MOA and AOA
- Object clause covering lending, financing or investment activities
The company should have a suitable corporate structure before applying for NBFC registration through Company Incorporation
2. Net Owned Fund (NOF) Requirement
The company must maintain the minimum Net Owned Fund (NOF) required by RBI according to the applicable NBFC category.
NOF generally includes:
- Paid-up equity capital
- Free reserves
- Eligible share premium
The company must maintain proper records of capital contribution, fund sources and financial statements.
3. Business Plan Requirement
RBI evaluates the proposed business model of the company. The business plan should include:
- Lending activities and customer segment
- Loan products
- Risk management process
- Technology system
- Financial projections
A clear business plan helps demonstrate the company's readiness to operate as an NBFC.
4. Directors and Promoters Requirement
RBI reviews the background of directors and promoters before granting approval. The assessment may include:
- Financial background
- Experience
- Reputation
- Source of investment
Directors should maintain proper KYC records and complete applicable compliance such as Director KYC Filing.
Documents Required for NBFC Registration in India
Before applying for an NBFC Certificate of Registration (CoR), the company needs to prepare various corporate, financial and operational documents. RBI reviews these documents to verify the company's ownership structure, financial capability, business model and compliance readiness.
The commonly required documents include:
| Category | Documents Required |
|---|---|
| Company Documents | Certificate of Incorporation, MOA, AOA and company details |
| Directors & Promoters Documents | PAN, identity and address proof, DIN details, KYC documents and promoter/director background details |
| Financial Documents | Net Worth Certificate, bank statements, source of funds proof and capital details |
| Business Documents | Business plan, financial projections, lending model and operational strategy |
| Office Documents | Registered office proof, rent agreement/ownership proof and utility bills |
| Compliance Documents | KYC Policy, AML Policy, Risk Management Policy and other required policies |
| Other Documents | Board Resolution, auditor certificates and RBI-required declarations |
The exact documents may vary depending on the NBFC category and proposed business activities. Companies should also maintain proper statutory records through services such as Annual Compliance after incorporation.
Step-by-Step Process for NBFC Registration in India
The NBFC registration process involves multiple stages, starting from company preparation to obtaining RBI approval. Each stage requires proper documentation, financial planning and compliance preparation.
Step 1: Incorporate a Company
The first step is to establish a suitable company structure under the Companies Act. The company should have proper business objects, eligible directors and a planned shareholding structure before applying for NBFC registration. Businesses can complete incorporation through Private Limited Company Registration.
The company must arrange and maintain the required Net Owned Fund (NOF) as prescribed by RBI.
The company should maintain proper records of:
Memorandum and Articles of Association, with financial activity as the principal object
- Shareholder contribution
- Source of funds
- Capital structure
- Bank records
Bank records: The company must arrange and maintain the required Net Owned Fund (NOF) as prescribed by the RBI. It should also maintain proper records relating to its Memorandum and Articles of Association, with financial activity included as the principal object, along with details of shareholder contributions, source of funds, capital structure and relevant bank records.
Step 3: Prepare NBFC Business Plan
The company needs to prepare a clear business plan covering:
- Proposed lending activities
- Target customers
- Loan products
- Revenue model
- Risk management approach
- Operational structure
Step 4: Prepare Required Documents and Policies
Before filing the application, the company should prepare necessary corporate documents and regulatory policies, including:
- KYC Policy
- AML Policy
- Fair Practices Code
- Grievance Redressal Policy
- Financial and operational documents
Step 5: Submit Application Through RBI Portal
After completing documentation, the company can submit the NBFC application through the RBI online application system. The application includes company details, promoter and director information, financial documents, business plan and required declarations.
Step 6: RBI Scrutiny and Verification
RBI reviews the application and examines:
- Company structure
- Promoters and directors background
- Source of funds
- Business model
- Compliance framework
RBI may ask for additional clarification or documents during the review process.
Step 7: RBI Approval and Certificate of Registration
After successful verification, RBI may grant the Certificate of Registration (CoR), allowing the company to start NBFC activities according to the approved category. After registration, the company must continue following RBI compliance and reporting requirements.
NBFC Registration Timeline
The time required for NBFC registration depends on factors such as document readiness, company structure, business model and RBI review process.
A general timeline may include:
| Stage | Estimated Duration |
|---|---|
| Company Incorporation & Document Preparation | 2–6 weeks |
| Business Plan and Policy Preparation | 2–4 weeks |
| RBI Application Review and Approval | Depends on RBI examination and clarifications |
The actual timeline may vary depending on the completeness of documents, regulatory requirements and response time during the review process.
Common Reasons for Delay in NBFC Registration
A properly prepared application with complete documents and clear business planning can help reduce delays during the RBI review process.
Common reasons include:
- Incorrect Company Objects: The MOA should clearly cover the proposed financial activities. Incorrect or incomplete objects may lead to RBI queries.
- Weak Business Plan: Lack of a clear lending strategy, risk management approach and financial projections may affect the application review.
- Unclear Source of Funds: The company should maintain proper records of capital contribution, ownership funds and source of investment.
- Incomplete Documentation: Missing documents, incorrect details or inconsistent information can delay the processing of the application.
- Lack of Compliance Framework: The company should have proper understanding of RBI requirements and necessary compliance policies before starting NBFC operations.
Difference Between NBFC and Bank
| Basis | NBFC | Bank |
|---|---|---|
| Regulatory Authority | Regulated by RBI | Regulated by RBI |
| Registration / Licence | Requires NBFC Certificate of Registration (CoR) from RBI | Requires Banking Licence from RBI |
| Accept Demand Deposits | Generally not allowed to accept demand deposits | Allowed as per banking regulations |
| Lending Activities | Provides loans and credit facilities according to approved NBFC category | Provides loans and banking credit facilities |
| Payment Services | Limited payment-related activities | Provides full banking payment facilities |
| Cheque Facility | Cannot issue cheques drawn on itself | Provides cheque facility |
NBFCs and banks both provide financial services, but they operate under different regulatory frameworks and have different permitted activities.
Net Owned Fund (NOF) for NBFC Registration
The cost of NBFC registration depends on factors such as the type of NBFC, company structure, documentation requirements, professional services and compliance setup. NBFC registration involves more than just application filing. The company needs to plan for regulatory requirements, preparation of documents, policy framework and financial requirements.
The major cost components include:
| Cost Component | Description |
|---|---|
| Company Incorporation Cost | Expenses related to company formation, DSC, DIN and MCA filings |
| Professional Charges | Cost involved in preparing business plans, policies and RBI application documents |
| Net Owned Fund (NOF) Requirement | Regulatory capital requirement prescribed by RBI for applicable NBFC categories |
| Compliance Setup Cost | Expenses related to accounting, reporting and operational compliance systems |
| Technology Infrastructure | Cost related to software, loan management systems and data management tools |
The Net Owned Fund (NOF) requirement should be maintained separately as regulatory capital and is not a registration fee paid to RBI. Companies should review the latest applicable requirements from the Reserve Bank of India official website before planning their NBFC investment structure.
NBFC Registration Fees and Government Charges
Vakilkaro's professional fee for NBFC Registration starts at ₹5,00,000 + GST, covering company structuring, business plan, RBI policies, application filing and query support. There is no separate RBI licence fee, but the company must maintain the prescribed Net Owned Fund.
There is no separate licence purchase fee charged by RBI for granting an NBFC Certificate of Registration (CoR). However, companies may incur expenses related to various registration and compliance requirements, including:
- Company incorporation
- Documentation and application preparation
- Professional services
- Policy and compliance preparation
- Legal and financial consultation
- Operational infrastructure setup
The major financial requirement for NBFC registration is maintaining the prescribed Net Owned Fund (NOF) as applicable to the selected NBFC category. The NOF amount is a regulatory capital requirement and not a government registration fee.
Compliance Requirements After NBFC Registration
Obtaining an NBFC Certificate of Registration (CoR) is only the beginning of the regulatory journey. After registration, an NBFC must continuously comply with RBI guidelines and applicable financial regulations.
Important compliance requirements include:
1. RBI Returns and Regulatory Reporting
NBFCs must submit periodic returns and regulatory information to RBI according to their category and applicable reporting requirements.
2. KYC and AML Compliance
NBFCs must maintain proper customer verification procedures, risk assessment systems and Anti-Money Laundering (AML) controls as per applicable RBI guidelines.
3. Accounting and Financial Reporting
The company must maintain proper books of accounts, loan records, financial statements and complete applicable audit and reporting requirements.
4. Customer Protection and Fair Practices
NBFCs must follow transparent lending practices, disclose loan terms properly and maintain a suitable grievance redressal mechanism for customers.
5. Record Maintenance and Internal Controls
NBFCs should maintain required records, internal policies and compliance systems to ensure smooth regulatory operations. Companies should regularly review RBI updates and maintain corporate compliance through services such as Accounting and Compliance Services.
Reasons for NBFC Certificate of Registration Cancellation
RBI may take regulatory action against an NBFC if the company fails to comply with applicable laws, regulations or RBI directions.
Common reasons may include:
- Failure to maintain the required Net Owned Fund (NOF)
- Non-compliance with RBI guidelines and directions
- Incorrect or incomplete regulatory reporting
- Violation of customer protection requirements
- Improper lending or recovery practices
- Failure to submit mandatory returns
- Non-compliance with applicable NBFC conditions
Therefore, maintaining continuous compliance and proper regulatory practices is essential after obtaining NBFC registration.
Benefits of NBFC Registration in India
NBFC registration provides a regulated framework for companies planning to enter the financial services sector. It helps businesses conduct permitted financial activities while following RBI regulations.
Key benefits include:
- Legal Recognition as a Financial Entity RBI registration provides recognition as a regulated financial institution, which can improve trust among customers, investors and business partners.
- Opportunity to Provide Lending Services NBFC registration allows companies to provide permitted lending and financing services according to their approved category.
- Better Funding Opportunities A regulated financial structure may help companies attract investors and explore institutional funding opportunities.
- Support Financial Inclusion NBFCs play an important role in providing credit solutions to individuals, MSMEs, small businesses and underserved segments.
- Build a Scalable Financial Business An NBFC structure helps companies develop financial products and services with proper regulatory and operational systems.
NBFC vs Microfinance Company
Many entrepreneurs confuse NBFC registration with microfinance company registration. Both are related to lending activities, but their scope, regulatory requirements and business models may differ.
| Basis | NBFC | Microfinance Company |
|---|---|---|
| Regulation | Regulated by RBI according to the applicable NBFC category | Regulation depends on the legal structure and applicable framework |
| Lending Scope | Can provide various financial services such as lending, financing and investment activities according to approval | Mainly focuses on providing small-value loans to eligible borrowers |
| Registration Requirement | RBI Certificate of Registration (CoR) is required for NBFC activities | Registration requirements depend on the selected microfinance structure |
| Customer Segment | Individuals, businesses, MSMEs and other eligible borrowers | Mainly individuals and small borrowers requiring microfinance support |
| Compliance | Requires compliance with RBI NBFC regulations and reporting requirements | Compliance depends on the applicable regulatory framework |
Businesses should select the appropriate structure based on their proposed lending activities, target customers and regulatory requirements. For businesses planning microfinance-related activities, related information can be explored through Microfinance Company Registration.
NBFC-MFI vs Section 8 Microfinance Company
A NBFC-MFI and a Section 8 Microfinance Company are different structures created for different purposes. The right structure depends on whether the organisation wants to operate a regulated lending business or a non-profit financial inclusion model.
| Basis | NBFC-MFI | Section 8 Microfinance Company |
|---|---|---|
| Regulatory Authority | Regulated by the Reserve Bank of India (RBI) | Registered under the Ministry of Corporate Affairs (MCA) |
| Main Purpose | Provides regulated microfinance lending services | Works for non-profit objectives, including financial inclusion activities |
| Business Model | Operates as a financial institution with permitted lending activities | Operates for charitable or social welfare objectives |
| Profit Distribution | Business income may be used according to applicable regulations | Profits cannot be distributed as dividends to members |
| Compliance Framework | RBI guidelines, reporting and NBFC regulations | Companies Act and Section 8 Company compliance requirements |
The suitable structure depends on the organisation’s objectives, proposed activities and regulatory requirements. Businesses planning non-profit financial inclusion activities can explore Section 8 Company Registration.
Why Choose Vakilkaro for NBFC Registration?
- Knowledge of NBFC registration requirements, RBI guidelines and applicable compliance framework.
- Evaluation of suitable NBFC category and proposed business structure.
- Support with corporate, RBI and regulatory documentation.
- Preparation of NBFC policies, agreements and compliance documents.
- Coordination for documentation related to promoters, directors, financial records and company structure.
- Support in understanding post-registration compliance requirements, including regulatory filings and ongoing obligations.
Vakilkaro also provides related corporate and legal services including Company Registration, LLP Registration, Trademark Registration and other business compliance solutions.
