ARTICLE ON SIMPLIFIED PROCESS OF REGISTRATION OF NBFC- BY CS BHARAT MISHRA

SIMPLIFIED PROCESS OF REGISTRATION OF NBFC 

By CS Bharat Mishra      

The Reserve Bank of India vide its press release dated June 17, 2016 has simplified and rationalize the process of registration of NBFC. Earlier this process was lengthy and complex. The number of documents which were required to  be submitted to Reserve Bank of India has been reduced from 45 (practically more than 55 - 60) to 7-8 (practically around 15-17).

The Reserve Bank has defined two types application for Non deposit taking NBFC which are as follows:

1.    Type I – NBFC-ND not accepting public fund/ not intending to accept public funds in the future and not having customer interface/ not intending to have customer interface in the future.

2.    Type II- NBFC-ND accepting public funds/intending to accept public funds in the future and having customer interface/intending to have customer interface in the future.

The definition of Public fund and customer interface has been prescribed in the press release itself which is reproduced below for the sake of convenience and better understanding:

 “Public funds" shall include funds raised either directly or indirectly through public deposits, commercial paper, debentures, inter-corporate deposits and bank finance but excludes funds raised by issue of instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue as defined in Regulatory Framework for Core Investment Companies issued vide Notification No. DNBS (PD) CC.No. 206/03.10.001/2010-11 dated January 5, 2011.

“Customer interface” means interaction between the NBFC and its customers while carrying on its NBFI business as defined in Non-Systemically Important Non-Banking financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 issued vide Notification No. DNBR. 008/CGM (CDS) -2015 dated March 27, 2015

The Bank has not changed the minimum Net Owned Fund requirement of Rs. 2 Crores.

As Type I Company will not have any customer interface they are considered as less sensitive and they would be on fast track mode. The updated version of application form and documents required for registration are available on Reserve Bank website. The online application has also been revised.

Now only one copy (original ) of application along with all annexure is required to be submitted to Reserve Bank at their office in Mumbai either by hand or by registered post. Earlier the applicant Company was required to submit two sets of application at the respective Regional Office of Reserve Bank.

The applicant Company should use the updated version of documents as prescribed by the Reserve Bank. An indicative list of documents which are required to be submitted along with application for registration is detailed as follows:

1.   Annex – I (Company Identification Particulars)

In Annex- I basic information about the Company like its name, CIN, PAN, Address of Registered Office, details about Net Owned funds, Assets and Liabilities, principal banker and Statutory Auditor is required to be furnished.

There is a compulsion on Statutory Auditors to verify the Net Worth of Shareholders holding substantial Interest (more than 10%) in the Company.  

2.   Annex – II (Statement of Capital funds)

In Annex – II the Company is required to furnish detail about the Net Owned fund.

Annex – I and II are required to be certified by the Statutory Auditors of the Company.

3.   Annex – III (Information on the Management)

In Annex – III information about the Management is required to furnish. The Company is required to use separate form for each of Director.

4.   Certified copies of Certificate of Incorporation and Certificate of Commencement of Business in case of public limited companies.

5.   Certified copies of extract of only the main object clause in the MOA relating to the financial business.

6.   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

7.   Copy of Fixed Deposit receipt & bankers certificate of no lien indicating balances in support of NOF

8.   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

9.   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

10.    Cibil Report of all Directors

11.  Cibil Report of the Company.

12.  List of all pending cases and action taken against the Directors/ Shareholder/ Major Functionaries for default in repayment of deposit or payment of interest.

13.  List of all court cases pending against the Company.

Author – CS Bharat Mishra is a Practicing Company Secretary and can be contacted at cs.bharatmishra@gmail.com or 9818161277.