RBI compliance for NBFCs has been more complicated lately. There used to be a time when banks enjoyed benefits from non-banking financial firms. There was a moment when compliance with NBFCs was much easier and lenient, but RBI drafted new compliance for NBFCs after the Sahara case and kept them under screening. Securitization of standard assets and instructions for a private placement of NBFCs are a portion of the important regulations. RBI continues to bring forward attempts to resist theory in NBFCs.
Non-Banking Financial Firms are registered under the 2013 Companies Act and are engaged in the business of collecting deposits, loans and advances, buying stocks/bonds/shares, government-issued debentures, and securities. The NBFCs are actively engaged and registered in the financial operations of the Reserve Bank of India. Without getting a license from the Reserve Bank of India, no NBFC can run its business.
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The annual NBFC compliance checklist defines the NBFC compliance due date and returns that every NBFC is required to file. The list is rendered according to the RBI guidelines and master directions.
Non-banking financial companies must comply with the compliance later mentioned in this blog, as per the Non-Banking Financial Company Returns (Reserve Bank) Instructions, 2016.
Based on Liabilities
Based on Activities
Below we have compiled an annual NBFC compliance checklist for every Non-Deposit and Deposit Company. See below:
|Undiscovered March Return / NBS-7 Return
|On or before 30th June
|Statutory Auditors Certificate of Income and Assets
|On or before 30th June
|Details of companies with FDI or Foreign Funds
|On or before 30th June
|Inspected return for March / NBS-7
|The audited file of annual balance and P&L Account
|One month from the date of signoff
|Reconciliation of a Public Deposit Rejection
|Before the commencement of the new Financial year
|Announcement of Auditors to Annual Audit Company
|By the 7th of each month
|Upload Monthly Return
|By the 7th of each month
|Appointment of Director (Appendix-III)
|Within 30 days of appointment
|Resignation of Director that is DIR-12 + Challan report
|That too in 30 days of appointment
|Receipt of any notice at the next Board Meeting and filing a certified copy with the RBI
According to Master Direction  – The NBFC-NDs-SI and NBFC-SI deposit company must file the following refunds as set out below:
Deposit NBFCs are required to submit the following refunds:
NBFC Non-deposit type is needed to send or submit the annual statement of capital funds, risk assets, ratio, etc. it can be submitted either digitally or physically. Moreover, capital adequacy, Liquidity, and other disclosure norms have been consolidated in Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) directions, 2007.
ALM Returns are allowed by NBFC Non-Deposit-SII to be submitted
Moreover, if you have already obtained the NBFC License, as mentioned above, you are expected to comply with NBFC enforcement. In addition, the effects of non-compliance can lead to severe fines and even to the business being shut down.
However, if it is challenging for you to follow up on NBFC compliance, you can contact the Legalraasta consultant. We will take full care of your Non-Banking Financial Company’s compliance.
ALM Returns: ALM (Asset-Liability Management) Returns refers to the number of returns that must be submitted by NBFCs-ND-SI from time to time as described below:
Quarterly return on substantial non-deposit financial parameters taken by NBFCs holding assets above Rs. 50 crores and higher but below Rs. 100 crores.
Non-deposit taking NBFCs with an asset size around Rs. 50 crores and Rs. 100 crores The basic details must be submitted periodically over the last three years, such as company name, address, NOF, and profit/loss.
In addition to the above compliances, there are several other compliances under the provisions of the Companies Act, 2013 that must be observed by all NBFCs PAN-India, which are as follows:
Compliance that applies to the whole NBFC regardless of the following functions:
1. Name and Official Appointment of its Chief Executive Officers.
2. Name and residential address of company directors.
3. Sample Signature of Chief Executive Officer authorized to sign on behalf of the Company.
Also, any changes or amendments made by Apex Bank to the guidelines provided above will be notified by the Reserve Bank of India within 1 month from the date of the change or amendment.
In addition to the above-mentioned compliance with RBI for NBFCs with PAN-India registration, there are some other regulations provided by RBI referred to in Chapter IV of the Master Director. These laws are referred to as the Prudential Regulations. Again, it is mandatory for any NBFC to comply with the regulations as follows:
1. Standard Property
2. Assets Sub-Standard directors.
3. Doubtful properties
4. Assets Loss
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Non-banking financial companies’ aka NBFCs are the financial institution that do not hold banking license but deals in financial services. They are allowed to involve in financial activities under section 45-IA of the RBI Act. NBFCs have increased in its types and it has played a massive role in meeting the credit demand that has been largely unmet by traditional financial institutions.
NBFCs are managed by different financial bodies of India such as RBI, IRDA, SEBI, National Housing Bank, etc. NBFCs deal in various aspects of financing, and they are regulated different financial bodies as per their nature of the activity.
Not every NBFC is required to register under RBI, but they are need to register with the respective regulators that they are regulated by. For example, Nidhi, Chit, National Housing Bank, Insurance companies are also NBFC, but they are regulated under different laws.
For NBFC registration, there is a requirement of minimum capital of Rs. 2 cr; therefore, an applicant needs to register a company with the prescribed capital along with the requisite government fees.
NBFCs offer various banking and non-banking services to the people in need. They do not own a banking license for the services they render but they must follow the rules and regulations laid down by the RBI. NBFC registration is necessary in order to extend the functions of an NBFC. Only a registered NBFC can commence full fledged NBFC operations. Reserve Bank of India regulates and supervises the functions of NBFCs according to the provisions mentioned in Chapter III B of the RBI Act 1934.
All NBFCs cannot accept public deposits. The NBFCs can accept/renew public deposits for a minimum 12 months period and maximum 60 months period. NBFCs cannot accept deposits repayable on demand.
A business that fulfils the criteria for grant of NBFC registration is eligible to apply for NBFC license. It includes that such company should be registered under the Companies Act 2013 and should have the minimum capital of 2 crores rupees.
It is not mandatory to get NBFC software; you can get it once you are licensed.
An NBFC company cannot take a loan to meet Rs 2 crore requirements.
Yes, you can use an initial fixed deposit but for a specified period of time.
Well, it is necessary to have a certain amount of experience to get this license.
The RBI has been accorded the powers under the RBI Act 1934 to register, lay down policy, issue directions, inspect, regulate, supervise and exercise surveillance over NBFCs which comply with the defined 50-50 criteria of principal business. The Reserve Bank can also penalize NBFCs for violating the provisions of the RBI Act or the directions or orders issued by RBI.
If companies that are needed to be registered with the RBI as NBFCs are found to be conducting non-banking financial activity, like lending, investment or deposit acceptance as their principal business activities, without seeking registration, the Reserve Bank has the power to levy penalty or monetary fine on them or can even prosecute such companies in the court of law.
RBI has the authority to cancel the certificate of registration if an NBFC violates the provisions under the RBI Act or fails to meet the minimum requirements prescribed by the RBI. However there is a provision of appeal if an NBFC is not pleased with the RBI order. It may file an appeal against the order within a period of thirty (30) days from the date of the order of cancellation of the certificate of registration.
The list of registered NBFC is available on the official website of RBI. One can check the same by visiting www.rbi.org.in.
Net owned fund of a company means the amount left after investment of such company in shares of its subsidiaries, companies in the identical group and other NBFCs and the book value of debentures, bonds, loans & advances outstanding including hire purchase & lease finance made to & deposits with subsidiaries and companies in the same group, to an extent that it goes beyond 10% of the owned fund.
As per the RBI guidelines, Net Owned Funds at the time of takeover should not be less than INR 2 crores.
There are two major sources from where NBFC can get funds. These include borrowing from other financial institutions or accepting term deposits however all NBFCs cannot accept deposits. Apart from this NBFCs can also raise funds through commercial papers.
Yes, it is advisable to hire an NBFC consultant.
It should not be less than INR 2 crores though limit can exceed.
NBFCs stand for Non-banking Financial Institutions. Some of the common examples of NBFCs include investment banks, mortgage lenders, money market funds, insurance companies, private equity funds, hedge funds and Peer 2 Peer lenders.
A company registered by the Companies Act, 2013 and seeking to commence business of non-banking financial institution as defined under Section 45 I(A) of the RBI Act, 1934 must comply with the below things: i) It must be a company registered under Section 3 of the Companies Act, 2013. ii) It must have a prescribed minimum amount of net owned fund of ₹ 200 lakh (The minimum net owned fund (NOF) required for specialized NBFCs like NBFC-MFIs, NBFC-Factors, CICs is indicated separately by RBI on specialized NBFCs).
Unlike banks, NBFCs are not allowed to accept such deposits which are repayable on demand. Banks form an integral part of payment and settlement cycle while NBFC, is not a part of the system.
Well the documents required for obtaining such registration involves documents submission by directors, shareholders and Applicant Company. Some necessary documents include Certificate of Incorporation, updated KYC of the Shareholders and Directors, Net-Worth Certificate of directors, shareholders, and the company, education and qualification proof of the directors, company’s PAN & GST number, documents in support of the address of the company, details of the bank account of the company, the board’s resolution approving the formation of NBFC, etc.
The answer is No. Although Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Nidhi Companies, Insurance companies, Companies engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, and Chit Fund Companies are NBFCs, however, they have been exempted from the requirement of registration under Section 45-IA of the RBI Act, 1934 subject to certain conditions. These are regulated by different authorities under different rules.
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