NBFC stands for a non-banking financial company. The NBFC Registration is done under the companies act. A non-banking financial company is very much similar to a commercial bank, except for the following differences, have a look at them that are as follows: –
1) A non-banking financial company can’t accept any demand deposits.
2) A non-banking financial company can’t issue cheque that is drawn to itself.
3) The deposits in NBFC are not insured as they are insured in a bank by the deposit insurance and Credit Guarantee Corporation.
The non-banking financial companies just like commercial banks, but only except for the above-mentioned differences do engage in banking businesses like making of loans and advances or acquisition and trading of the shares and stocks or bonds and debentures/securities. Also leasing and hire purchase and insurance businesses or chit businesses. An NBFC can do all of this except it will not include any particular institution that has a principal business of agriculture activity or any industrial activity. It doesn’t also include purchase or sale of any kind of goods (other than the securities or providing any type of service and sale or purchase or construction of immovable property.
Also, a particular company that has a principal business of getting deposits under any type of scheme or an arrangement in one lump of a sum of an instalment by the way of their contributors or in any other way is also a non-banking financial company.
What are the categories of the non-banking financial company?
There are two types of NBFC Registration. One is deposit taking and other is non-deposit taking. Both are being further classified based on their size.
Getting to the NBFC Registration
Now as per the section 45 — IA of the reserve bank of India act of 1934, no company is supposed to commence any business of a non-banking financial company without obtaining the NBFC Registration certificate. Also, you must have a minimum of net owned funds of Rs 200 lakhs. This incorporation of the NBFC Registration is incorporated under the section 3 of the companies’ act of 1956. The net owned funds are the final balance of owned funds minus the amount of investments in shares of the subsidiary. This includes the companies in the same group and all the other non-banking financial companies, the book value of debentures, hire purchases, outstanding loans, lease finance made and deposit with a subsidiary. All these commence in the same group.
The owned funds are an aggregate of the paid-up part of equity capital, preference shares which are also compulsory and convertible into the equity, the free reserves and balance in shares premium account and the capital reserves that represent the surplus that’s arising out of the scale proceeding to the asset which excludes the reserves created by revaluation of the asset, after the deduction of accumulated balance of loss.
Application for NBFC Registration
Application for the NBFC Registration must be made to the regional office of the RBI with a list of documents that are required to be submitted. Though financial companies are not regulated by the RBI, it supervises the companies with financial assets more than 50% of its total assets.
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