NBFC License

NBFC license: How to start it successfully in India

NBFC or Non Banking Financial Company is a popular form of business in India. Providing nearly all the functionalities of a bank, but still not bound by its rules is an advantage that most entrepreneurs are willing to take. However, to start a successful one, it takes more than a good financial record and enthusiasm.

Therefore, in this blog, we are going to discuss how can you start a successful NBFC in India.

Conduct market research

NBFC is a popular domain with many players in it. To stand apart from all of them you need to have a good USP. Extracting a unique selling point is not a task that you can take on easily, unless you’re willing to dive into the market research. It will give you a picture of your client’s desires. The more of their pain points get revealed to you, the closer you’d be to your niche. And when you’re finally able to discern what type of non-banking financial service you can provide, you can ready yourself to take the next step. Read More: RNI Registration

Draft a plan

After thinking of your USP, you need to materialize it on paper by drafting a plan. It’s plan that should involve:

  1. Your budget
  2. Your client base,
  3. And the projection of your business.

For budgeting, you’ll need to set the minimum capital requirement as mentioned in RBI guidelines as the bench mark. The reserve bank of India, via the Reserve Bank of India act, 1997 has set the minimum capital requirement for an NBFC to be INR 25 Lakh.

You can research your client base quite easily. You can scour the social media or you can resort to the old method of surveying – asking your prospects about the services that they require. It’s the part of the plan that you’d spend most of your time on, as you’d need all the time you can get to get a running start as soon as you obtain the NBFC license.

To project how much success you’d attain within the first three years of starting your NBFC company, you can refer to the help of accounting consultants in your team. They can give you a realistic picture of what future might hold for your company.

Establish a company

Time to give form to your business. Register your company with the Ministry of Corporate affairs. The steps to do that are as follows:

  1. Think of a good name
  2. File the RUN application to get the approval to use that name
  3. Use the business plan you’ve drafted to draft Memorandum of Association, a legal document that describes the objective of your business
  4. Go online and obtain a standard Articles of Association for the NBFCs. Copy it on a stamp paper.
  5. Obtain the DSC of the directors
  6. File the online SPICe application of company incorporation
  7. Once the application is processed, you’ll obtain Certificate of Registration of your company.

Your company is now established. Read More: M2M Communication

Getting the NBFC license

With Company Incorporation certificate, you have given the infrastructure to your NBFC. It’s time to get the license to start your operations. It’s called the NBFC license and the issuer is Reserve Bank of India.

Start by gathering the documents specified below:

  1. Certificate of incorporation
  2. Details of board of directors
  3. Brochure of the company
  4. Copy of the PAN card of the company
  5. Copy of the CIN of the company
  6. MOA and AOA of the company
  7. Credit report of each director of the company
  8. Copy of a board resolution that states that you haven’t started doing any NBFC activity and won’t start it until after receiving the NBFC license.
  9. Copy of board resolution agreeing to meet the Fair Practices Code
  10. Statutory Auditor’s certificate that you’re not accepting any public deposits
  11. Details of bank account
  12. Audited Balance sheet
  13. Income tax return copies
  14. Bank statement details
  15. Business plan of the company.

Afterwards, file the online application for NBFC registration via the RBI portal.

After online application filing, take the printout of the filled application form and attach it with the hard copies of the documents required. Submit them to the RBI head office in your region.

Reserve Bank of India would thoroughly assess your application form and if no discrepancies are found, you’ll obtain the NBFC license.

And now, you can start to operate your business.

Want to know how to start a successful NBFC license in India? Read this blog to find out.

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