Nbfc presentation

PRESENTATION ON
Privileged & Confidential

WHAT IS A NON-BANKING FINANCIAL COMPANY (NBFC)
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act,
engaged in the business of loans and advances, acquisition of shares/ stocks/ bonds/
debentures/ securities issued by Government or local authority or other marketable securities of
a like nature, leasing, hire-purchase, insurance business, chit business but does not include any
institution whose principal business is that of agriculture activity, industrial activity, purchase or
sale of any goods (other than securities) or providing any services and
sale/purchase/construction of immovable property.
A non-banking institution which is a company and has principal business of receiving deposits
under any scheme or arrangement in one lump sum or in instalments by way of contributions or
in any other manner, is also a non-banking financial company (Residuary non-banking company).

NBFCs and Banks Differentiation
• NBFCs cannot accept demand deposits.
• NBFCs do not form part of the payment and settlement system and cannot
issue cheques drawn on itself.
• Deposit insurance facility of Deposit Insurance and Credit Guarantee
Corporation is not available for NBFC depositors unlike in case of banks.

REGISTRATION WITH RBI
In terms of Section 45-IA of the RBI Act, 1934, no Non-banking
Financial company can commence or carry on business of a
non-banking financial institution without:
a) Obtaining a Certificate of Registration from the Reserve
Bank of India; and
b) Without having a Net Owned Funds of Rs. Two Crore.
NBFCs Type I & Type II
a) Type I - NBFC-ND not accepting public funds1/ not intending to accept public funds in the
future and not having customer interface2/ not intending to have customer interface in the
future.
b) Type II - NBFC-ND accepting public funds/ intending to accept public funds in the future
and/or having customer interface/intending to have customer interface in the future.

PROCEDURE FOR REGISTRATION OF NBFC
Step-1: Formation of Company
Step-2: Minimum Net Owned Fund of Rs.
2 Crore
Step-3: File an Application online for
issue of Certificate of Registration with
RBI
Step-4: On Receipt of Certificate of
Registration, the Company can
commence business.

DOCUMENTS REQUIRED TO BE FILED WITH APPLICATION
FOR TYPE-I NBFC-ND
1. Certified copies of Certificate of Incorporation and Certificate of Commencement of Business in
case of public limited companies.
2. Certified copies of extract of only the main object clause in the MOA relating to the financial
business.
3. Board resolution stating that:
a) the company is not carrying on any NBFC activity/stopped NBFC activity and will not carry
on/commence the same before getting registration from RBI
b) the UIBs in the group where the director holds substantial interest or otherwise has not accepted
any public deposit in the past /does not hold any public deposit as on the date and will not accept
the same in future
c) the company has formulated “Fair Practices Code” as per RBI Guidelines
d) the company has not accepted public funds in the past/does not hold any public fund as on the
date and will not accept the same in the future without the approval of Reserve Bank of India
e) the company does not have any customer interface as on date and will not have any customer
interface in the future without the approval of Reserve Bank of India.
4. Copy of Fixed Deposit receipt & bankers certificate of no lien indicating balances in support of NOF

5. For companies already in existence, the Audited balance sheet and Profit & Loss account along with
directors & auditors report or for the entire period the company is in existence, or for last three years ,
whichever is less, should be submitted
6. Banker’s report in respect of applicant company, its group/subsidiary/associate/holding
company/related parties, directors of the applicant company having substantial interest in other
companies The Banker’s report should be about the dealings of these entities with these bankers as a
depositing entity or a borrowing entity. Note: Please provide bankers report from all the bankers of
each of these entities and provide the report for all the entities. The details of deposits and loans
balances as on the date of application and the conduct of the account should be specified.

FOR TYPE-II NBFC-ND
1. Certified copies of Certificate of Incorporation and Certificate of Commencement of Business in
case of public limited companies.
2. Certified copies of extract of only the main object clause in the MOA relating to the financial
business.
3. Board resolution stating that:
a) the company is not carrying on any NBFC activity/stopped NBFC activity and will not carry
on/commence the same before getting registration from RBI
b) the company has not accepted any public deposit, in the past (specify period)/does not hold any
public deposit as on the date and will not accept the same in future without the prior approval of
Reserve Bank of India
c) the UIBs in the group where the director holds substantial interest or otherwise has not accepted
any public deposit in the past /does not hold any public deposit as on the date and will not accept
the same in future
d) the company has formulated “Fair Practices Code” as per RBI.
4. Copy of Fixed Deposit receipt & bankers certificate of no lien indicating balances in support of NOF.
5. For companies already in existence, the Audited balance sheet and Profit & Loss account along
with directors & auditors report or for the entire period the company is in existence, or for last
three years, whichever is less, should be submitted

FOR TYPE-II NBFC-ND
6. Copy of the certificate of highest educational and professional qualification in respect of all the
directors
7. Copy of experience certificate, if any, in the Financial Services Sector (including Banking Sector) in
respect of all the directors.
8. Banker’s report in respect of applicant company, its group/subsidiary/associate/holding
company/related parties, directors of the applicant company having substantial interest in other
companies The Banker’s report should be about the dealings of these entities with these bankers as a
depositing entity or a borrowing entity.
NOTE: Please provide bankers report from all the bankers of each of these entities and provide the
report for all the entities. The details of deposits and loans balances as on the date of application and
the conduct of the account should be specified.

TYPES OF NBFCs
TYPE I-NBFC -ND
TYPE II-NBFC -ND
Investment Company (IC))
Infrastructure Finance Company (IFC)
Non-Banking Financial Company - Micro Finance Institution
(NBFC-MFI))
Non-Banking Financial Company – Factors (NBFC-Factors)

PROCESS
3. Application +
necessary
documents
4. Reserve Bank
of India (Regional
Office)
Approve
Send for
Resubmission
Certificate of
Registration
Removal of Defects
Filing
2. Minimum Net
Owned Fund of Rs.
2 Crore
1. Incorporation of
Company
5. Reserve Bank
of India (Central
Office)
Screening

Ceiling on Acceptance of Public Deposits
Category of NBFC Ceiling on Public Deposits
AFC* maintaining CRAR of 15%
without credit rating
1.5 times of NOF*** or Rs 10
crore whichever is less
AFC with CRAR of 12% and
having minimum investment
grade credit rating
4 times of NOF
LC/IC** with CRAR of 15% and
having minimum investment
grade credit rating
1.5 times of NOF
* AFC = Asset Finance Company
** LC/IC = Loan company/Investment Company
*** NOF = Net Owned Fund

Important regulations relating to acceptance of deposits
 The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months
and maximum period of 60 months. They cannot accept deposits repayable on demand.
 NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to
time. The present ceiling is 12.5 per cent per annum. The interest may be paid or
compounded at rests not shorter than monthly rests.
 NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors.
 NBFCs (except certain AFCs) should have minimum investment grade credit rating.
 The deposits with NBFCs are not insured.
 The repayment of deposits by NBFCs is not guaranteed by RBI.
 Certain mandatory disclosures are to be made about the company in the Application Form
issued by the company soliciting deposits.
 Overdue interest is payable to the depositors in case the company has delayed the
repayment of matured deposits, and such interest is payable from the date of receipt of
such claim by the company or the date of maturity of the deposit whichever is later, till the
date of actual payment. If the depositor has lodged his claim after the date of maturity, the
company would be liable to pay interest for the period from the date of claim till the date of
repayment. For the period between the date of maturity and the date of claim it is the
discretion of the company to pay interest.

Owned Fund and Net-owned Fund
‘Owned Fund’ 'Net Owned Fund'
Paid-up equity capital
+ Preference Shares which are
compulsorily convertible
into equity
+ free reserves
+ balance in share premium
account
+ capital reserves
representing surplus arising
out of sale proceeds of asset
(excluding reserves created
by revaluation of asset)
– accumulated balance of loss
– deferred revenue
expenditure
– other intangible assets
Owned Fund
– [(the amount of investments
of such company in shares
of its subsidiaries companies
in the same group and all
other NBFCs and the book
value of debentures, bonds,
outstanding loans and
advances including hire
purchase and lease finance
made to and deposits with
subsidiaries and companies
in the same group) to the
extent it exceeds 10% of the
owned fund.]

RBI Compliances
NBFCs accepting
public deposits
 Audited balance sheet and profit and loss account along with Director’s Report and
Auditor’s Report;
 Statutory Quarterly Return on deposits;
 Certificate from the Auditors that the company is in a position to repay the deposits;
 Quarterly Return on prudential norms;
 Quarterly Return on liquid assets;
 Annual return of critical parameters by a rejected company holding public deposits;
 Half-yearly Returns by companies having public deposits of Rs. 20 crore and above or
asset size of Rs. 100 crore or more;
 Monthly return on exposure to capital market by deposit taking NBFC with total assets
of Rs 100 crore and above;
 A copy of the Credit Rating obtained once a year;
 Certificate from Statutory Auditors to the effect that the NBFC continues to undertake
the business of NBFI requiring holding of COR under Section 45-IA of the RBI Act;
 To furnish the information in respect of any change in the composition of Board of
Directors, address of the company and its Directors, etc.

RBI Compliances (Contd..)
NBFCs not accepting public deposits
having assets of Rs. 100 crore and above
 Quarterly statement of capital funds, risk weighted assets, risk asset ratio etc.;
 Monthly Return on Important Financial Parameters of the company;
 Asset- Liability Management returns;
 Monthly Statement of short term dynamic liquidity;
 Half Yearly Statement of structural liquidity;
 Half yearly Statement of Interest Rate Sensitivity;
 Passing of a board resolution to the effect that they have neither accepted public
deposit nor would accept any public deposit during the year.
 Certificate from Statutory Auditors to the effect that the NBFC continues to undertake
the business of NBFI requiring holding of COR under Section 45-IA of the RBI Act.
 To furnish the information in respect of any change in the composition of Board of
Directors, address of the company and its Directors, etc.
 To maintain minimum CRAR of 15% and to comply with single/group exposure norms.

RBI Compliances (Contd..)
NBFCs not accepting public deposits
having assets more than Rs.50 crore and above but less than
Rs 100 crore
 Quarterly return on important financial parameters of the company. Basic
information like name of the company, address, NOF, profit / loss during
the last three years.
 Passing of a board resolution to the effect that they have neither
accepted public deposit nor would accept any public deposit during the
year.
 Certificate from Statutory Auditors to the effect that the NBFC continues
to undertake the business of NBFI requiring holding of COR under Section
45-IA of the RBI Act.
 To furnish the information in respect of any change in the composition of
Board of Directors, address of the company and its Directors, etc.

COMPLIANCES
LIQUID ASSET REQUIREMENT
• The minimum level of liquid assets to be maintained by NBFCs is 15% of public
deposits outstanding as on the last working day of the second preceding
quarter.
• of the 15%, NBFCs are required to invest not less than 10% in approved
securities and the remaining 5% can be in unencumbered term deposits with
any scheduled commercial bank.
Liquid assets includes -
Government
securities
Government
guaranteed bonds
term deposits with
any scheduled
commercial bank
Note - NBFCs have been directed to maintain the mandated liquid asset securities
in a dematerialised form

OUR SERVICES
At initial stage:
 Seeking Name Availability with the Registrar of Companies.
 Drafting of Memorandum and Articles of Association of the Company.
 Preparation of Affidavits and Declarations required for incorporation of the
Company.
 Filing of Incorporation Forms with Registrar of Companies.
 Assisting in issuance of Certificate of Incorporation and Certificate of
Commencement of Business from Registrar of Companies.
 Application of PAN, TAN, Service Tax Registration, etc.
 Opening of Bank Account.
 Assisting in issuance of Share Certificates and stamping of the same.

OUR SERVICES (Contd..)
During Registration with Reserve Bank of India:
 Drafting of Resolutions, Declarations and other documents forming part of
application to be submitted to Reserve Bank of India.
 Preparation of Application to be submitted to Reserve Bank of India.
 Liaisoning with Reserve Bank of India from time to time for issue of
Certificate of Registration.
 Preparation of Business Plan for the next three years, forming part of the
application.

OUR SERVICES (Contd..)
On an ongoing basis:
 Drafting of Resolutions, Agendas, Minutes, Agreements, etc.
 Preparation and filing of Forms required to be filed with the Registrar of
Companies.
 Monthly, Quarterly, Half Yearly and Annual Compliances with Reserve Bank of
India.
 Preparation of Statutory Registers of the Company.
 Organizing Board Meetings and General Meetings of the Company.
 Liaisoning with Reserve Bank of India and with Registrar of Companies from
time to time.

THIS IS JUST A TEASER. DETAILS CAN BE DISCUSSED.
Thanks & Regards.
CS Shweta Gupta
Email : shweta@muds.co.in
Contact: +91-9911222771, 0124-4034204
Address : A-60, Sanjay Gram, (Opposite Sector-14)
Gurgaon-122001

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