Incorporation Procedures for an NBFC in India

Incorporation Procedures for an NBFC in India

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Here are the steps to incorporate an NBFC:

• A company must first be incorporated under the Companies Act 2013 or must already be listed as a Private Limited or Public Limited Company under the Companies Act 1956.

• The Company's minimum net owned funds should be Rs. 2 crore.

• Three-quarters of the Directors must have prior financial experience.

• The Company's CIBIL records have to be spotless.

• A thorough five-year business plan is required of the corporation.

• The business must abide by FEMA and capital compliance regulations.

• Once the aforementioned requirements have been met, the online application on the RBI website should be completed and submitted along with the necessary documentation.

• There will be a CARN Number produced.

• The Reserve Bank of India's regional branch must also receive a paper copy of the application.

• The application will be thoroughly examined before the Company is granted the License.

Guidelines that an NBFC Needs to Follow - • The following rules must be followed once the Company obtains a valid licence:

• The company's ability to accept public deposits must be for a minimum of 12 months and a maximum of 60 months.

• The Reserve Bank of India will not guarantee the repayment of any amount thus taken by the Company, and the interest charged by the Company cannot exceed the ceiling set by the Reserve Bank of India from time to time.

• The Reserve Bank of India must be informed of any company-related information as well as any changes to the Company's composition.

• The public will accept unsecured deposits.

• Every year, the Company is required to provide its audited balance sheet.

• Every year, the corporation must provide a statutory return on the deposits it has taken in the form NBS-1.

• A quarterly return on the company's liquid assets must be provided.

• It was necessary to obtain a certificate from the auditors attesting that the company is able to repay all deposits or funds obtained from the public.

• A half-yearly Asset Liability Management (ALM) report is required from any corporation with a public deposit of at least Rs. 20 crore or assets of at least Rs. 100 crore.

• A minimum level of 15% of the Public Deposits must be maintained by the Company in Liquid Assets, and the Credit Rating must be taken and submitted every six months in the RBI.If the NBFC defaults in the payment of any amount taken, the consumer can go to the National Company Law Tribunal or the Consumer Forum to file a suit against the Company.