HARMONISATION OF DIFFERENT
CATEGORIES OF NBFCS BY RBI
NEW NORMS FOR REGISTRATION &
COMPLIANCES OF NBFCs
RBI’s RECENT MOVE
To encourage the ease of doing business of NBFCs, Reserve Bank
of India decided that in order to provide NBFCs with greater operational
flexibility, harmonisation of different categories of NBFCs into fewer ones
shall be carried out based on the principle of regulation by activity rather
than regulation by entity.
Accordingly, it has been decided to merge the three categories
of NBFCs viz. Asset Finance Companies (AFC), Loan Companies (LCs) and
Investment Companies (ICs) into a new category called NBFC – Investment
and Credit Company (NBFC-ICC).
BACKGROUND OF HARMONISATION OF DIFFERENT
CATEGORIES OF NBFCS
Various categories of NBFCs have evolved over time pertaining to
specific sector/asset classes. Regulations put in place for each NBFC category
have also been somewhat different. At present, there are twelve such
categories.
The Committee on Comprehensive Financial Services for Small
Businesses and Low Income Households (chaired by Dr. Nachiket Mor) and Internal
Committee (Chairman: Shri G. Padmanabhan), which submitted their reports in
January 2014 and April 2014 respectively, had recommended harmonisation of the
various categories of NBFCs.
The Reserve Bank is committed to such harmonisation and to move
towards activity-based regulation replacing the current entity-based regulation
for the NBFC sector. As a first step in this direction, deposit acceptance regulations
were harmonised in November 2014. Further, with the recent rationalization and
liberalization of ECB norms, differential rules applicable to various
categories of NBFCs stand harmonised.
HARMONIZATION OF THREE CATEGORIES OF NBFCs INTO
ONE
It has now been decided to harmonise major categories of NBFCs
engaged in credit intermediation, viz., Asset Finance Companies (AFC), Loan
Companies, and Investment Companies, into a single category. The proposed
merger of existing categories would reduce to a large extent the complexities
arising from multiple categories and also provide the NBFCs greater flexibility
in their operations. It will cover 99% of the NBFCs by number.
CLASSIFICATION OF THREE CATEGORY OF NBFC INTO
SINGLE CATEGORY
RBI on vide notification dated 22nd Feb 2019
merge the following three categories of NBFCs
·
Asset finance company (AFC): An AFC
is a company which is a financial institution carrying on as its principal
business the financing of physical assets supporting productive/economic
activity, such as automobiles, tractors, lathe machines, generator sets, earth
moving and material handling equipment, moving on own power and general purpose
industrial machines.
·
Investment company (IC): IC
means any company which is a financial institution carrying on as its principal
business the acquisition of securities.
·
Loan company (LC): LC
means any company which is a financial institution carrying on as its principal
business the providing of finance whether by making loans or advances or
otherwise for any activity other than its own but does not include an asset
finance company.
The merged category has been defined as follows:
“Investment and Credit
Company – (NBFC-ICC)” means any company which is a financial institution
carrying on as its principal business- asset finance, the providing of finance
whether by making loans or advances or otherwise for any activity other than
its own and the acquisition of securities; and is not any other category of
NBFC as defined by the bank in any of its master directions.
INVESTMENT CAP
The release also mentioned that a deposit taking NBFC-ICC shall
invest in unquoted shares of another company which is not a subsidiary company
or a company in the same group of the NBFC, not exceeding twenty percent of its
owned fund.
Experts
believe the harmonisation will provide operational ease for both the regulator
and the NBFCs
ELIGIBILITY CRITERIA TO REGISTER AS NBFC -ICC
1.
A company should be registered under the Companies Act,
1956/Companies Act 2013
2.
Company should have a minimum net owned fund of ₹ 200 lakh/
Fixed Deposit of Rs. 200
3.
One of the Director should be having exposure into Financial
industry for running the Operations of NBFC.
4.
Cibil score of all the Director should be more than 700.
BRIEF PROCEDURE TO SET UP NBFC-ICC IN INDIA
To
register/ Set up NBFC in India, Company has to apply Reserve Bank of India for
the License to carry the business of NBFC-ICC. Following are the brief
steps in this regards:-
|
Steps
-1 :-
|
Incorporate
a company under a companies Act 2013 with minimum paid-up Capital of Rs. 2
Crores.
|
|
Step-2
:-
|
Open
current bank account of the Company and deposit 2 Cr. as per the shareholding
of the members and keep this 2 Cr. as Fixed deposit which is free from all
lien
|
|
Step-3:-
|
File
online application with RBI portal with all the annexures.
|
|
Step-4:-
|
Two
sets of Physical application in originally will be submitted to RBI Mumbai
head branch.
|
|
Step-5 :-
|
RBI
scrutinize the application and ask for some
information/clarification/submission
|
|
Step-6:-
|
Submit
reply to RBI within 30 days of receiving notice.
|
|
Step-7:-
|
On
being satisfied by RBI, Certificate is granted!
|
Frequently Asked Question
1.
Which
entity can apply for the NBFC-ICC Licence?
A private or public company registered under the companies Act
1956/2013 and having a minimum net owned fund of ₹ 200 lakh can apply for NBFC
Licence to RBI
2.
What is the
time frame to register as NBFC-ICC Company?
The generally time frame to register as NBFC is approx 4-5
Months rest its depend upon the applicant profile.
3.
What are
the essential documents required to be submitted along with the application
form to the Regional Office of the Reserve Bank?
(i)
CIBIL Report & ITR (last 3 years) of all directors
(ii)
Certified copies of extract of only the main object clause in the MOA relating
to the financial business
(iii)
Board resolution stating that
·
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
·
the company has not accepted any public deposit. in the past
(specify period)/does not hold any public deposit as on the date and will not
accept the same in future without the prior approval of Reserve Bank of India
·
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
·
the company has formulated “Fair Practices Code” as per RBI
Guidelines
(iv)
Copy of Fixed Deposit receipt bankers certificate of no lien indicating
balances in support of NOF
(v)
Copy of the certificate of highest educational and professional
qualification in respect of all the directors
(vi) Copy
of experience certificate, if any, in the Financial Services Sector (including
Banking Sector) in respect of all the directors
(vii)
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.
(viii)
Net Worth Certificates of all directors and shareholders holding more than 10 %
(ix)
Business Plan
(x)
Projected Financial of next three year
4.
What will
be the ROC fees for setting up Company with the capital of Rs. 2 Crore?
The ROC
fees will be around 3 lakhs to 3.5 Lakhs depending upon the state in which
Company is going to registered.
5.
Is it
necessary that every NBFC should be registered with RBI?
In
terms of Section 45-IA of the RBI Act, 1934, no Non-banking Financial company
can commence or carry on business of a non-banking financial institution
without obtaining a certificate of registration from the Bank
6.
What action
is taken if financial companies which are lending or making investments as their principal business do not obtain a
Certificate of Registration from the Reserve Bank?
If companies that are required to be registered with the Reserve
Bank as NBFCs, are found to be conducting non-banking financial activity, such
as, lending, investment or deposit acceptance as their principal business,
without seeking registration, the Reserve Bank can impose penalty or fine on
them or can even prosecute them in a court of law. If members of public come
across any entity which does non-banking financial activity but does not figure
in the list of authorized NBFC on RBI website, they should inform the nearest
Regional Office of the Reserve Bank, for appropriate action to be taken for
contravention of the provisions of the RBI Act, 1934.
7.NBFCs are charging high
interest rates from their borrowers. Is there any ceiling on interest rate
charged by the NBFCs to their borrowers?
Reserve Bank of India has deregulated interest rates to be
charged to borrowers by financial institutions (other than NBFC- Micro Finance
Institution). The rate of interest to be charged by the company is governed by
the terms and conditions of the loan agreement entered into between the
borrower and the NBFCs. However, the NBFCs have to be transparent and the rate
of interest and manner of arriving at the rate of interest to different
categories of borrowers should be disclosed to the borrower or customer in the
application form and communicated explicitly in the sanction letter etc.
8. What are the RBI Compliance to running NBFC
Business?
|
Particulars
|
Compliances
|
||
|
Filling
of returns i.e.NBS-8/NBS-9
|
NBS-8
(Annual return to be submitted by NBFCs having asset size between Rs 100 to
Rs 500cr)
|
||
|
Statutory
Auditor Certificate (SAC)
|
NBS-9
(Annual return to be submitted by NBFCs having asset size below Rs 100cr)
|
||
|
Every
NBFC shall submit a Certificate from its Statutory Auditor every year to the
effect that it is engaged in the business of non-banking financial
institution requiring it to hold a Certificate of Registration granted under
section 45-IA of the RBI Act.
|
|||
|
Note:-
NBS-8/9 has to file on RBI Cosmos Portal within 60 days (i.e 30th May) from
the Close of Financial Year.
|
|||
|
Membership
of Credit Information Company(CIC) (With Four Agencies)
|
Credit
information collected/maintained by CI updated regularly on a monthly basis
or at such shorter intervals as may be mutually agreed upon between the CI
and the CIC in terms of Regulation 10 (a) (i) and (ii) of the Credit
Information Companies Regulations, 2006. Four agencies are :
|
||
|
·Credit
Information Bureau (India) Ltd
|
|||
|
· Equifax
Credit Information Services Pvt. Ltd
|
|||
|
· Experian
Credit Information Co. of India Pvt. Ltd
|
|||
|
· Highmark
Credit Information Services Pvt. Ltd.
|
|||
|
Registration
of Company with Financial Intelligence Unit – India (FIU-IND)
|
NBFCs
to register with the country’s financial intelligence unit (FIU-IND) and
report details of clients as per the requirements under the Prevention of
Money Laundering Act.
|
||
|
Registration
of Company with CERSAI(Central Registry of Securitisation Asset
Reconstruction and Security Interest)
|
|||
|
S. No
|
Nature
of transaction to be Registered
|
FORM
|
|
|
1
|
Particulars
of creation or modification of Security Interest in favour of secured
creditors
|
FORM-I
|
|
|
2
|
Satisfaction
of any existing Security Interest
|
FORM-II
|
|
|
3
|
Particulars
of securitisation or reconstruction of financial assets
|
FORM-III
|
|
|
4
|
Particulars
of satisfaction of securitisation or reconstruction transactions
|
FORM-IV
|
|
|
CKYC
of Company
|
CKYC
is a government initiative to bring KYC process of all financial sector
entities under a single window. Mandatory for each company in finance
|
||
