NBFC Ready Reckoner (Part 1)

A Simplified Guide to Understanding Non-Banking Financial Companies in India

If you’re trying to understand the world of NBFCs, here’s the thing, this sector isn’t just growing; it’s reshaping India’s financial landscape. Over the last decade, NBFCs have become the go-to source of credit for individuals, small businesses, and entrepreneurs who often feel ignored by traditional banks.

They offer quicker approvals, flexible lending structures, and products that match the real needs of borrowers. No unnecessary paperwork. No long delays. No rigid processes.

Let’s break down everything you need to know.

What Exactly Is an NBFC?

An NBFC is a company registered under the Companies Act, 2013, engaged in:

• Loans and advances
• Leasing and hire purchase
• Investment in securities
• Microfinance
• Financing assets and businesses

NBFCs operate under Chapter IIIB of the RBI Act, 1934, and must obtain approval from the Reserve Bank of India (RBI) before starting operations.

Unlike banks, NBFCs cannot accept demand deposits, cannot issue cheques, and are not part of the payment and settlement system. But they fill a massive gap left by banks by offering accessible and customizable credit.

The Principal Business Criteria (PBC)

For a company to qualify as an NBFC, it must meet two conditions:

1. More than 50% of its total assets must be financial assets
2. More than 50% of its total income must come from financial activities

If both conditions are met, RBI treats the company as a financial institution.

Types of NBFCs in India

NBFCs aren’t one-size-fits-all. They come in multiple categories, depending on what they do. Here’s a simple breakdown.

1. Investment and Credit Company (NBFC-ICC)

These NBFCs provide loans, finance assets, and invest in securities. They form the largest and most common category.

2. Infrastructure Finance Company (NBFC-IFC)

These companies finance large-scale infrastructure projects such as:

• Roads
• Power plants
• Ports
• Railways

At least 75% of their assets must be in infrastructure loans.

3. Infrastructure Debt Fund (IDF-NBFC)

IDFs channel long-term funds from domestic and foreign investors into infrastructure projects. They often raise money by issuing bonds or units that attract pension and insurance funds.

4. Mortgage Guarantee Company (MGC-NBFC)

These companies provide mortgage guarantees—a safety net for lenders in case a borrower defaults.
At least 90% of their income must come from this activity.

5. Non-Operative Financial Holding Company (NOFHC)

An NOFHC is a parent holding company that owns a bank and other financial institutions within a group. RBI uses this structure to ensure clean separation between banking and non-banking businesses.

6. Micro Finance Institution (NBFC-MFI)

NBFC-MFIs lend to low-income individuals and small businesses. Their focus is financial inclusion through:

• Small ticket loans
• Savings support
• Micro-insurance
• Remittance services

7. NBFC-Factor

NBFC-Factors purchase business receivables at a discount to provide companies with immediate working capital. It’s a crucial service for MSMEs with long receivable cycles.

8. Systemically Important Core Investment Company (CIC-ND-SI)

These companies primarily invest in shares and securities of group companies.
They must hold 90% or more of total assets in such investments.

How NBFCs Differ From Banks

While NBFCs and banks offer similar financial services, the distinctions are crucial:

• NBFCs cannot accept demand deposits
• NBFC deposits do not have insurance protection
• NBFCs are not allowed to issue cheques
• NBFCs are outside the payment and settlement system

Yet, NBFCs outperform banks in flexibility, speed, and outreach.

Requirements for NBFC Registration

To become an NBFC in India, a company must:

• Be registered under the Companies Act, 2013
• Maintain a minimum Net Owned Fund (NOF) of ₹10 crore
• Ensure at least one director has financial/banking experience
• Maintain clean credit history for the company and its directors/shareholders

NBFC Registration Process: Step-by-Step

Here’s how the registration process typically unfolds:

1. Submit Online Application on RBI’s COSMOS Portal

Upload documents and complete the form.

2. Obtain the Application Reference Number (ARN)

This helps track the application status.

3. Send a Physical Copy to RBI’s Regional Office

The hard copy must match the online submission.

4. RBI Conducts a Thorough Review

This includes:

• Financial stability
• Management background
• Board structure
• Business plan
• Source of Net Owned Funds

5. RBI Issues the Certificate of Registration (CoR)

Once satisfied, RBI grants approval – allowing the company to operate as an NBFC.

Documents Required for NBFC Registration

You’ll need:

1. Incorporation Certificate
2. Memorandum of Association with financial activities clause
3. Board resolutions confirming no NBFC activity prior to registration
4. Banker’s certificate + Fixed Deposit receipt (showing NOF compliance)
5. Last 3 years of audited financial reports
6. Banker’s report for company and directors
7. Qualification and experience proofs for directors

Conclusion

NBFCs have become a cornerstone of India’s financial ecosystem, filling the gap left by traditional banks and supporting millions of borrowers, entrepreneurs, and small businesses. Their flexibility, faster processing, and customer-first approach make them essential for financial inclusion and economic growth.

But here’s the thing, running or registering an NBFC is not just about lending money. It requires disciplined compliance, strong documentation, a clean regulatory track, and a deep understanding of RBI’s evolving guidelines. That’s where having the right support makes all the difference.

Habinx Compliance LLP helps businesses and NBFC aspirants navigate this entire landscape with confidence. From company registration and GST filing to accounting, legal documentation, and RBI-focused compliance, Habinx ensures every process is smooth, accurate, and aligned with regulations. Their guidance helps financial companies focus on growth while critical compliance work is handled with precision.

If you’re planning to register an NBFC, expand operations, or streamline regulatory filings, partnering with Habinx Compliance LLP simplifies the journey and reduces compliance risk.

Contact Habinx Compliance LLP
📧 info@habinxcompliance.com
📞 +91 95111 17743

FAQs

1. What is an NBFC and how is it different from a bank?

An NBFC is a company registered under the Companies Act, 2013, that provides loans, credit, leasing, and other financial services. Unlike banks, NBFCs cannot accept demand deposits, cannot issue cheques, and are not part of the payment and settlement system. They focus more on flexible and customer-friendly lending solutions.

2. What is the Principal Business Criteria (PBC) for NBFCs?

A company qualifies as an NBFC when more than 50% of its total assets are financial assets and more than 50% of its total income comes from financial activities. Meeting both criteria is mandatory for RBI recognition.

3. How many types of NBFCs are there in India?

NBFCs come in multiple categories including Investment and Credit Companies (ICC), Infrastructure Finance Companies (IFC), Infrastructure Debt Funds (IDF), Mortgage Guarantee Companies (MGC), NBFC-MFIs, NBFC-Factors, NOFHCs, and Core Investment Companies (CIC-ND-SI). Each type has a distinct function and regulatory requirement.

4. What is the minimum Net Owned Fund (NOF) required for NBFC registration?

RBI mandates a minimum NOF of ₹10 crore for any company applying for NBFC registration. The amount must be maintained as liquid, unencumbered funds.

5. What is the complete process for registering an NBFC with the RBI?

The process includes submitting an online application through RBI’s COSMOS portal, receiving the Application Reference Number (ARN), sending a physical application to the regional office, undergoing RBI scrutiny, and finally receiving the Certificate of Registration (CoR) upon approval.

6. What documents are required for NBFC registration?

Key documents include the Certificate of Incorporation, MoA with financial activity clause, board resolutions, banker’s certificate showing NOF, audited financials for three years, banker’s reports for directors, and proof of qualification and experience of directors.

7. How do NBFCs contribute to India’s financial inclusion?

NBFCs provide faster approvals, flexible products, and customer-centric credit solutions, making them accessible for small businesses, first-time borrowers, and individuals who may not qualify for bank loans. They play a major role in bridging credit gaps in underserved areas.

8. How can Habinx Compliance LLP help with NBFC registration and compliance?

Habinx Compliance LLP assists with NBFC registration, GST filings, accounting, documentation, and full regulatory compliance. They help entrepreneurs meet RBI requirements efficiently and ensure all paperwork, filings, and legal processes are managed correctly.
Contact: info@habinxcompliance.com | +91 95111 17743