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Note on new NBFC registration

Dear Sir

Sub: Note on Non Banking Finance Companies (NBFCs)

As discussed, please find below a detailed note on NBFC:-

1. Incorporation of NBFC:

1. To file form INC 1 with ROC with the main object of carrying on business of NBFCs
2. Minimum authorized capital is 2 Crores 10 Lakhs.
3. On getting the approval of registration from ROC, the application has to be filed with department of NBFC, RBI for RBI Registration.
4. An NBFC cannot commence or carry on its business without obtaining a certificate from RBI and minimum net own fund shall be INR 2 crores.

2. RBI Directions:

1. RBI has notified following directions applicable to NBFCs
A. NBFCs acceptance of pubic deposits (RBI) Directions, 1998
B. Non Banking Financial Companies Prudential Loans (RBI) Directions 1998
C. Non Banking Financial Companies Auditors Report (RBI) Directions 1998

3. Broad classification of NBFCs:

1. NBFCs accepting public deposits
2. NBFCs not accepting public deposits

4. Regulation for NBFCs not accepting Public Deposits:
NBFCs not accepting public deposits can be further classified in 2 categories
1. NBFCs engaged in Loan Investment, Hire Purchase Finance and Equipment Leasing
2. NBFC which acquires shares or securities of their group companies

What is Public Deposits?
“Public deposits” means any receipt of money by way of deposit or loan or in any other form but however which excludes the following,
a. Amount received by way of share capital
b. Amount contributed as a capital by partners of firm
c. Amount received from bank or financial institutions
d. Amount received in the ordinary course of business by way of security deposits, dealership deposits, earnest money and advances against order of goods or properties or services
e. Amount received from a registered money lender (not being a company)
f. Amount received from Government or Semi Government Bodies
g. Any amount received by company from any other company (inter corporate deposits)
h. Amount’ received from a director or shareholder by a Private company (subject to furnishing a declaration that amount has not been given out of borrowed funds)
i. Amount raised by issue of bonds or debentures
j. Amount brought in by promoters by ~ay of unsecured loans in pursuance or in accordance with lending institution
k. Amount received from a relative of a Director

5. Matters of Compliance (NBFC not accepting Public Deposits:

NBFC not accepting Public Deposit will be regulated in limited manner
a. Within 30 days of commencement of new financial year a Resolution to be passed to the effect that company do not hold any Public Deposits and would not accept any Public Deposit during the year.
b. Auditor to mention in Audit Report about Grant or refusal of registration (if incorporated before 9/1/97).
c. Auditor to mention in Audit Report whether company has obtained a certificate of Registration from RBI (if incorporated on or after 9/1/97)
d. As far as accountings are concerned directions of prudential norms (except Para 10 and 12) shall be applicable for different accounting and disclosure
• Income from Investments
• Accounting Standards issued by ICAI
• Accounting for Investments
• Clarification of Assets (standard/sub standard/Doubtful/loan)
• Provisioning requirement
• Disclosure of Provisioning etc. (Above clauses are recommendatory in nature)
e. NBFC having assets more than 50 crores to constitute audit committee.
f. Auditor should verify that, if any of the NBFC regulations are applicable, then the same are properly complied with. If comments are unfavorable or qualified, the auditors report shall also state the reason for such unfavorable or qualified statement.
g. Auditor can also report directly to the reserve bank of India for such qualified or unfavorable statement.

6. Documents to be submitted to RBI by NBFCs for obtaining certificate and Registration from RBI:

An indicative list of documents/information to be furnished along with the application. All
documents/information is to be submitted in duplicate.

1. Minimum NOF requirement INR 2 Crore

2. Application to be submitted in two separate sets tied up properly in two separate files.

3. Annex II to be submitted duly signed by the director/Authorized signatory and certified by the statutory auditors.

4. Annex III (directors’ profile) to be separately filled up for each director. Care should be taken to give details of bankers in respect of firms/companies/entities in which directors have substantial interest.

5. In case the directors are associated or have substantial interest in other companies, indicate clearly the activity of the companies (whether NBFC or not).

6. Board Resolution specifically approving the submission of the application and its contents and authorizing signatory.

7. Board Resolution to the effect that 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 in writing.

8. Board resolution stating that 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.

9. Auditors Certificate certifying that the company is/does not accept/is not holding Public Deposit.

10. Auditors Certificate certifying that the company is not carrying on any NBFC activity.

11. Net owned fund as on date.

12. Certifying compliance with section 45S of Chapter IIIC of the RBI Act, 1934 in which director/s of the company has substantial interest.

13. Details of changes in the Memorandum and Articles of Association duly certified.

14. Last three years Audited balance sheet along with directors & auditors report.

15. Details of clauses in the memorandum relating to financial business.

16. Details of change in the management of the company during last financial year till date if any and reasons thereof.

17. Details of acquisitions, mergers of other companies if any together with supporting documents.

18. Details of group companies/associate concerns/subsidiaries/holding companies.

19. Details of infusion of capital if any during last financial year together with the copy of return of allotment filed with Registrar of Companies.

20. Details of the bank balances/bank accounts/complete postal address of the branch/bank, loan/credit facilities etc. availed.

21. Business plan for next three years indicating market segment to be covered without any element of public deposits.

22. Cash flow statement, asset/income pattern statement for next three years.

23. Brief background note on the activities of the company during the last three years and the reasons for applying for NBFC registration.

24. II(b) is the company engaged in any capital market activity? If so, whether there has been any non-compliance with SEBI Regulations? (Statement to be certified by Auditors).

25. Whether any prohibitory order was issued in the past to the company or any other NBFC/RNBC with which the directors/promoters etc. were associated? If yes, details thereof.

26. Whether the company or any of its directors was/is involved in any criminal case, including under section 138(1) of the Negotiable Instruments Act? If yes, details thereof.

27. Whether the company was granted any permission by ECD to function as Full-fledged Money Changers?

28. Whether the company was/is authorised by ECD to accept deposits from NRIs.

29. Whether “Fit and Proper” Norms for Directors have been fulfilled.

7. Registration with Government authority:

As per rules and regulations applicable to NBFC Companies registration.

8. Tenure:

If documents are proper then we can get license within 5 to 8 months time span.

9. Place of rendering Services:
The place of rendering services generally shall be our office situated at 2 nd Floor, 496B, Om Apartment, Near KCC Classes, Kasba Peth, Pune – 411 011.

Pramodkumar R. Ladda
Company Secretary

Tel: +91-20-24570055 | Office Cell : +91- 9404923393, 8624919609, 9175395604 |
Personal Mob. : +91- 9922735476, 9595271145 | Skype id: pramodladda
Ladda Bhutada & Associates : 2nd Floor, OM Apartment, SR No. 496/B, KCC Classes Lane,
Opp. R. M. Kabara Electricals & Rale Estate, Kasba Peth, Pune – 411011 Maharashtra, India.
info@csladda.com | http;//www.csladda.com


Along with Company Law we are also dealing in all types of Licensing, registrations and Liasoning services. Few areas in which we had already served to our clients are:

a) Business Setup Services
b) MPCB (Maharashtra Pollution Control Board) Consent To Establish
c) MIDC (Maharashtra Industrial Development Corporation) Provisional
d) Factory Inspector Approval
e) Ministry of Environment and Forests (MOEF)
f) Water Connection Sanction from MIDC
g) MSEDCL (Power) Approval
h) PESO (Petroleum and Explosive Safety Organization)
i) CCOE (Chief Controller of Explosives) Approval
j) Support for EIA (Environmental Impact Assessment) (EIA documentation by MITCON or other Authorities)
k) MPCB Consent to Operate
l) Any other statutory approval not indicated above
m) MIDC (Maharashtra Industrial Development Corporation) approvals
n) Fire (Petroleum and Explosive) Department approvals
o) SEZ (Special Economic Zones)
p) EOU (Export Oriented Units)
q) STPI (Software Technology Park of India)
r) PSARA License for Security Guard providing Agencies
s) Hotel Setup and Subsidies
t) Finding of land (especially in MIDC area) for Companies and do necessary things till allotment of land
u) RBI (Reserve Bank of India) various permissions and compliances
– Recently we arranged FFMC (Full Fledged Money Changer) license for Pune based Company where Company now Authorised to do business of Dollar or other foreign currency conversion against INR
– FEMA (Foreign Exchange Management Act)
– FDI (Foreign Direct Investment)
– NBFC (Non Banking Financial Companies)
– Private Banking license (recent one week announcement by RBI)