A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013 and regulated by the Reserve Bank of India (RBI) under the RBI Act, 1934. NBFCs engage in activities such as lending, investment in securities, leasing, hire-purchase, insurance, chit-fund business, and other financial services — but do not include institutions whose principal business is agricultural or industrial activity.
Unlike banks, NBFCs cannot accept demand deposits, do not form part of the payment and settlement system, and cannot issue cheques drawn on themselves. However, they play a crucial role in the financial system by providing credit to underserved segments, promoting financial inclusion, and supplementing the banking sector.
At Deepa Sharma & Associates, we provide end-to-end NBFC compliance services — from initial registration with RBI to ongoing regulatory filings, governance framework setup, and KYC/AML compliance — ensuring your NBFC remains fully aligned with RBI's evolving regulatory requirements.
Every NBFC must obtain a Certificate of Registration from RBI under Section 45-IA of the RBI Act, 1934 before commencing any financial business activity.
The minimum NOF requirement is ₹10 crore for new NBFC registrations (as per RBI's revised guidelines effective from April 2022, with phased implementation).
The entity must be registered as a company under the Companies Act, 2013. Partnership firms, proprietary concerns, or LLPs cannot be registered as NBFCs.
Directors and promoters must satisfy RBI's "fit and proper" criteria including financial soundness, good track record, and absence of any criminal proceedings.
NBFCs must maintain a minimum Capital to Risk-weighted Assets Ratio (CRAR) of 15%, with Tier-I capital not less than 10% of aggregate risk-weighted assets.
Proper board composition with independent directors, rotation policies, and clearly defined roles and responsibilities for all board members.
Mandatory constitution of an Audit Committee with independent directors to oversee financial reporting, internal controls, and audit functions.
A dedicated Risk Management Committee to identify, assess, and mitigate credit risk, market risk, operational risk, and liquidity risk.
Strict norms for classification of assets as Standard, Sub-standard, Doubtful, or Loss — with corresponding provisioning requirements.
Robust internal audit mechanism covering all branches and business units, with periodic reporting to the Audit Committee and Board.
NBFCs are required to comply with comprehensive KYC (Know Your Customer) and AML (Anti-Money Laundering) norms as directed by the RBI under the Prevention of Money Laundering Act (PMLA), 2002 and the Master Direction on KYC.
NBFCs must file various returns with RBI at different frequencies. Below is a comprehensive compliance calendar.
Non-compliance with RBI directions can attract monetary penalties ranging from ₹5 lakh to ₹2 crore depending on the severity and nature of the violation.
RBI publishes penalty orders on its website. Regulatory actions damage the NBFC's reputation and affect relationships with banks, investors, and customers.
Persistent non-compliance or failure to meet regulatory requirements can lead to cancellation of the Certificate of Registration, effectively shutting down the business.
A strong compliance track record is essential for securing credit lines from banks, raising funds from investors, and expanding operations through new branches.
As per RBI's revised Scale Based Regulation (SBR) framework, the minimum NOF for new NBFC registrations is ₹10 crore. Existing NBFCs have been given a phased timeline to meet this enhanced requirement. Microfinance NBFCs and certain specialized categories may have different thresholds.
Non-filing or late filing of returns can attract monetary penalties under Section 58B of the RBI Act. Repeated defaults may lead to supervisory actions including directions to cease certain activities, restrictions on business operations, or in severe cases, cancellation of the Certificate of Registration.
CRAR (Capital to Risk-weighted Assets Ratio) is a measure of an NBFC's capital adequacy. NBFCs are required to maintain a minimum CRAR of 15%, with Tier-I capital not less than 10%. This ensures NBFCs have adequate capital buffer to absorb potential losses.
Yes, all NBFCs are mandated to comply with KYC/AML/CFT norms under the Prevention of Money Laundering Act and RBI's Master Direction on KYC. This includes customer identification, transaction monitoring, filing STRs/CTRs with FIU-IND, and maintaining records for at least 5 years after cessation of the business relationship.
Yes, RBI can cancel the CoR under Section 45-IA(6) of the RBI Act if the NBFC ceases to carry on financial business, fails to comply with conditions of registration, ceases to be a fit and proper entity, or fails to maintain minimum NOF. The NBFC is given an opportunity to be heard before cancellation.
Our team ensures your NBFC stays fully compliant with all RBI regulations, filings, and governance requirements.