NBFC License is the process to establish a Non-Banking Financial Company to aid the financial sector of India to grow even more. Providing multiple services to all kinds of individuals and entities, this company requires owners that have the economical knowledge to create a successful business venture. Therefore, the Reserve Bank of India has listed specific eligibility criteria to filter out the fit among the applicants of the NBFC license.
There are many ways to start a loan and investment business in India. Some decide to open a small shop to lend loans, and others decide to do something on a large scale. If you fall in the latter category, registering a Non-Banking Financial Company is something that you want to do.
In terms of structure, it has similarities to a bank. However, unlike a bank, a Non-Banking Financial Company, an NBFC doesn’t:
- Issue or draws cheques
- Accepts deposits
- Provide deposit insurance facility
Despite the lack of those facilities, the services an NBFC provides is large enough that many entrepreneurs are now considering it a viable way to enter the financial business domain. Read More: M2M Communication
However, out of all those aspirants, RBI considers only a few worthy of getting the NBFC license.
Let us now discuss the eligibility criteria one must meet to obtain this certificate.
Meet these eligibility criteria for the license to start your NBFC Company
The Reserve bank of India has highlighted the following eligibility criteria in Section 45(IA) of NBFC regulations. It states that in addition to hiring a skilled team of professionals, the applicants must also meet the required regulatory standard to set up a Non-Banking Financial Company:
The Directors should fit the profile of the RBI NBFC requirements
Those wishing to be the director of a Non-Banking Financial Company should have all the qualifications necessary to run the business. These include more than enough knowledge in Finance, credit and banking domains.
A Proper Business Plan is a must
The applicant should have the foresight to not just start an NBFC, but also grow it with time. Therefore, the Reserve Bank of India needs the applicants to have a business plan for the next five years. In that plan, the applicant must detail:
- The projected profits and expenditures
- And the schemes that they can introduce to further expand the NBFC
The net owned fund requirements
To obtain the NBFC license, the net worth of the applicant’s company should be at least INR 2 Crore. If the applicant finds it difficult to come up with the net worth, the Reserve Bank of India provides some time so that they can gather the requisite funds.
The credit history of the members should be clean
The Reserve Bank of India believes that to provide loaning and other services, one should have a good credit history. Thus, it is required that all the directors supporting the NBFC in the background now have defaulted on any repayments of loans to banks of other NBFCs. Read More: RNI Registration
Quality of the capital
The directors must pay the taxes of the net owned capital of the company. Furthermore, the RBI asserts that the directors adhere to all the compliance requirements.
What happens if the applicant fails to meet the above eligibility criteria?
If the applicant fails to meet even one of the above-mentioned eligibility criteria, the Reserve Bank of India will deem it unfit for the license.
As a result, it won’t entertain the NBFC license application regardless of how correctly the applicant has followed the process.
Meeting the eligibility criteria is necessary to obtain an NBFC License. Without it, the Reserve Bank of India won’t entertain your application. That is why you must only venture forward to obtain this license if you consider yourself worthy to get it.
For more details , contact Registrationwala.
The biggest hurdle to jump over to get NBFC License is meeting the eligibility criteria. The reserve bank of India’s list of them is difficult comprehend.