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NBFC.....THE FORMAL WAY TO DO FINANCE BUSINESS

 NBFC…THE FORMAL WAY OF DOING FINANCE BUSINESS IN INDIA…….KNEE OF OVERALL FINANCE BUSINESS

WHY NBFC:

It’s a formal way of doing finance business in India , not as a bank but not less than Bank.

The rapidly-growing Indian economy has provided the biggest & profitable opportunity to Non-Banking Financial Companies (NBFCs) in creating a niche for themselves in recent years.

The NBFCs do not hold banking licenses but they offer almost every service that banks do including accepting deposits, offering loans, performing financial intermediation, offering cash advances, leasing, hire purchases, etc.

In a thickly populated country like India, mainstream banking services are not capable of fulfilling the financial needs of all the citizens. Owing to this fact, the NBFC has been able to carve a space for itself by making inroads into the country.

NBFCs have grown at a remarkable pace in the last decade as a consequence of their customer-friendly approach, great flexibility, and attractive rate of returns. They cater to the urban and the rural, the needy and the deprived, as they have penetrated small towns and villages.

The Areas of Business of NBFCs

Wide scope of business opportunities of NBFCs are…..

  1. Acquisition of shares/ stocks/ securities/ bonds/ debentures issued by the Government or other authorities,
  2. Loans and Advances, all kind of loans from Micro Finance to Macro Finance
  3. Insurance Business,
  4. Chit Business,
  5. Hire-purchase,
  6. Leasing.

RBI clearly defines the domains which cannot be touched by the NBFCs:

  • agricultural activity,
  • industrial activity,
  • purchase or sale of any goods (other than securities), or
  • providing any services, sale or purchase, or construction of the immovable property.

Different Categories of NBFCs Registered With RBI

The NBFCs are categorized here based on the kind of activity they primarily undertake, knowing about them shall provide you insight as to your own preferences.

  • Non-Banking Financial Company-Micro Finance Institution
  • Infrastructure Debt Fund Non- Banking Financial Company
  • Systemically Important Core Investment Company
  • Non-Banking Financial Company-Factors
  • NBFC- Non-Operative Financial Holding Company
  • Mortgage Guarantee Companies
  • Infrastructure Finance Company
  • Asset Finance Company
  • Investment Company
  • Loan Company

Eligibility Norms For Registration of NBFCs

Prerequisite before getting NBFC Licence from RBI

  • Company should be registered under the Companies Act, 2013 or Companies Act, 1956
  • Company should have Minimum Net Owned Fund of INR 2 crore
  • Rich experience with Finance Field of the Directors in addition to other formalities.

The Procedure of Registration of NBFCs

It shall be beneficial for you to know in brief about the procedure of Registration of NBFC:

  • First formality is an incorporation of the applicant company under the Companies Act, 1956 or 2013, with Minimum
  • Net Owned Fund of INR 2 crore (Equity Share Capital & not Preference Share Capital).
  • Thereafter the applicant company needs to open a Bank Account and keep the entire sum of INR 2 crores in the bank’s deposit account, which should be free from all liens.
  • The applicant is then required to apply for registration online on RBI’s official website.
  • Post submission of the form, CARN (Company Application Reference Number) is generated that is helpful in future references.
  • Subsequently, the hard copies of all the documents are required to be submitted to the concerned Regional Office of RBI.
  • The Regional Office shall scrutinize the authenticity of the documents and on being satisfied, shall forward it to the Central Office.
  • The Central Office of RBI grants the NBFC registration only after the fulfilment of all prescribed requirements by the company under section 45-IA, of its act of 1934.

It is heard commonly that generally RBI do not give licence to every applicant, that’s true but if it is managed professionally with adequate pre due deligence of all documents, records and certifications in addition to detailed business plan, then it is not difficult to get licence from RBI in scheduled time.

FUTURE OF NBFC IN INDIA………….

It’s an era of Good Governance and the day will come, only formal finance sources will work, where the NBFC will play the pivotal role in the whole finance sector

County like India, which is over populated and having potential of huge opportunities for business, profession and vocations including services. There is huge gap of demand and supply of finance because the formal banking sector is not enough to meet all needs of the time and everybody does not fit into the fixed criteria framed for giving loans and advances, where the role of NBFC COMPANIES COMES, and there are huge demand developed in last couple of years.

Now a days , micro and small finance need and its supply became the talk of the people. People are being educated and comes to know about the Creditworthy ness- Importance of CIBIL and also came to know that without finance, any small or big business is not possible. NBFC coming forward to meet the need of all baskets by liberalising some strick norms and applying practical approach of looking towards genuineness of business, gravity of need and creditability and so on and so forth.

Young Generation, MSME, Micro Finance and Start-up are the most driving force for this Finance business. SIBIL control is the most safeguard provided to NBFC business in addition to flexibility for charging Interest and compliance charges are the most important factors for the growth and profitability of this Finance Sector.

THIS IS THE ERA OF GOOD GOVERNANCE AND NON COMPLIANTE COST IS ALWAYS MANY TIMES HIGHER THAN COMPLIANCE…….HENCE TO WORK IN AND WITH GOOD GOVERNANCE IS THE ULTIMATE WIN……………………………

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