get nbfc registration with rbi in india Archives - Business , Financial & Legal Consultant In India

August 17, 2020August 17, 2020

RBI guidelines on NBFC take over

What is NBFC?

A Non Banking Financial Company (NBFC) happens to be a company that is registered under the aegis of Companies Act, 2013 of India. It is involved in the trading of loans and advances, shares acquisition, stock, bonds, hire-purchase insurance business or chit-fund business.

Takeover of NBFC

Takeover of NBFC normally happens via the documents pertaining to the target firm. If Acquirer gets sanction to the takeover of the concerned NBFC, an MOU will be signed along with a token sum. Then Know Your Customer (KYC) Documents, Business Plan & Projection for 3 years have to be made with regard to incoming directors, as per the suggestion of the acquirer. Through this article, we intend to throw light on RBI regulation pertaining to the acquisition of NBFC.

Basic formalities

Relevant documents has to be submitted to the RBI by the acquirer. The acquirer has to reply to all RBI queries related to the takeover. After getting the approval letter from the RBI, the acquirer is required to issue a public notice in the 2 newspapers for 30 days in accordance with the RBI guidelines. This is done to invite any objection, if any, from the general public or any interested parties with regard to the change in management. The inking of Share Purchase Agreement & giving of change of management, payment of remaining considerations etc. has to happen on the 31st day of newspaper notice or as concurred by all the parties concerned.

The need of RBI Approval beforehand

Prior written consent of the RBI is needed for:

Any alteration in control of an NBFC, which might not lead to change of management;

Any change in the nature of shareholding, which would result in acquisition/ transfer of shareholding of 26 percent or more of the paid-up equity capital of NBFC. However, prior consent would not be mandatory if the nature of shareholding does not exceed 26 percent which is as a result of buy back of shares/ decrease of share capital and it has approval of the competent court. In such cases, the RBI has to be informed within 1 month from its occurrence.

Any change in the composition of the NBFC which would lead to an alteration in over 30 % of the directors, not including independent directors.

Beforehand approval is also not needed for those directors who are selected again post retirement on a rotational basis.

NBFCs will continue to concerning any alteration in their directors/ management as Financial Companies Acceptance of Public Deposits (Reserve inform the Reserve Bank required in Non-Banking Bank) Directions, 1998,

Non-Systemically Significant Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 & Systemically Important Non-Banking Financial (Non-Deposit Accepting Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015.

Application for advance Approval

Applications pertaining to this can be submitted to the Regional Office of the Department of Non-Banking Supervision under whose authority the Registered Office of the NBFC is located.

The need of advance Public Notice regarding alteration in Control/Management

It is necessary to give public notice of at least 30 days in advance prior to conducting the sale of, or change of the ownership via selling shares, or alteration in control, either with or without the sale of shares. This type of public notice will have to be provided by the NBFCs & also by the other party or jointly by the relevant parties, post getting the advanced permission of the RBI.

The public notice should clarify the reason to sell or transfer ownership/ control, the details regarding transferee & the motive behind such sale or transfer of ownership/ control. The notice has to appear in at least one prominent national & in one popular local (covering the place of registered office) vernacular newspaper.

The guidelines mentioned above are applicable instantly i.e., the same will be valid for any takeover or acquisition of control, any diversion in the shareholding or any change in the management happening post the date of this circular.

Other laws apply as well

These guidelines will be including, & not in suppression of the essence of any other laws, rules, regulations or directions, till the time it is active.

Repeal & Saving

Non Banking Financial Company, (Approval of Acquisition or Transfer of Control) Directions 2014 dated May 26, 2014, will remain cancelled. Despite this, any thing done, purported to have been done or unleashed within the directions hereby nullified shall continue to be guided by the clauses of the stated directions.

Annex

Particulars about the suggested promoters/ directors/ shareholders of the Company

Sr. No.	Particulars Required	Response
1.	Name
2.	Designation	Chairman/ Managing Director/ Director/ Chief Executive Officer
3.	Nationality
4.	Age (has be backed with the date of birth)
5.	Business Address
6.	Residential Address
7.	E-mail address/ Telephone number
8.	PAN Number under Income Tax Act
9.	Director Identification Number (DIN)
10.	Social security number/Passport No.*
11.	Educational/professional qualifications
12.	Professional milestone related to the task
13.	The area of business or vocation
14.	Any other information relevant to the Company
15.	Name/s of other companies in which the person has held the post of Chairman/ Managing Director/ Director/ Chief Executive Officer
16.	Name/s of the regulators (RBI, SEBI, IRDA, PFRDA, NHB or any other foreign regulator) of the entities mentioned in which the persons hold directorships
17.	Names of the NBFC, in case, the individual is related as Promoter, MD or Director comprising a Residuary NBFC, which has not been allowed to accept deposits/ prosecuted by the RBI?
18.	Details of the tribunal, if any, pending or commenced or resultant in a conviction in the past in contradiction of the person or against any of the entities he is associated with for violation of economic laws & regulations
19.	Cases, if any, involving the person or relatives of the person or the entities in which the person is associated with, are in default or have been in evasion in the last five years in related of credit services acquired from any entity or bank
20.	In case the person happens to a member of a professional association/ body, particulars of the disciplinary action, if any, pending or commenced or leading to conviction in the past against him/ her or whether he/ she has been barred entry of any professional occupation at any time
21.	Whether the person is eligible for disqualification provided under Section 164 of the Companies Act, 2013
22.	Has the individual or any of the companies, he/ she belongs to, been under any kind of probe at the instance of the Government Department or Agency
23.	Has the person been found violating rules/ regulations/ legislative requirements by Customs/ Excise/ Income Tax// Foreign Exchange/ Other Revenue Authorities, if so, give particulars
24.	Involvement in the business of NBFC (number of years)
25.	Equity shareholding in the company No. of sharesFace valuePercentage of total paid up equity share capital of the company
26.	Name/s of the companies, firms & proprietary concerns in which the person holds substantial interest
27.	Names of the principal bankers to the concerns at 26 above
28.	Names of the overseas bankers *
29.	Whether the number of directorships held by the person goes beyond the limits permitted under Section 165 of the Companies Act, 2013
* For foreign promoters/ directors/ shareholders Note: Different form should be given with regard to each of the proposed promoters/ directors/ shareholders

Information about Corporate Promoter

Sr. No.	Particulars Required	Response
1.	Name
2.	Business Address
3.	E-mail address/ Telephone number
4.	PAN Number under Income Tax Act
5.	Name & contact details of compliance officer
6.	Line of business
7.	The details of their major shareholders (more than 10%) & line of activity, if corporates
8.	Names of the principal bankers/ overseas bankers *
9.	Name/s of the regulators (RBI, SEBI, IRDA, PFRDA, NHB or any other foreign regulator)
10.	Names of Firms in the Group as defined in the Prudential Norms Directions
11.	Names of the firms in the Group that are NBFCs
12.	Specify the names of companies in the group which have been prohibited from accepting deposits/ prosecuted by RBI?
13.	Particulars of trial, if any, pending or started or led to a conviction in the past in contradiction of the corporation for violation of economic laws & regulations
14.	Cases, if any, wherein the corporate, has defaulted or have been in default in the last 5 years with regard to credit facilities sought from any entity or bank
15.	Whether the business has been under any kind of probe by the Government Department or Agency
16.	Has the Corporate been found guilty of violating rules/ regulations/ legislative requirements by Customs/ Excise/ Income Tax// Foreign Exchange/ Other Revenue Authorities, if so, give particulars
17.	Is the promoter corporate/ majority shareholder of the promoter business, if a business, ever applied to RBI for CoR which has been rejected

May 26, 2019May 26, 2019

A better Choice For Raising Funds for MSME

In the present scenario loans extended by the NBFCs to MSMEs grew rapidly and the experience of banks and NBFC in terms of quality asset explains the difference in the credit growth.

What is NBFC

NBFC is basically Non Banking financial institutions which is registered under the Companies Act, 2013 with principle objective of dealing in financial activities. Companies Financial asset shall constitute of more than 50% of the total asset and income, and Income for Financial statement constitutes more than 50% of gross income.

What is MSME

MSME stands for Micro and Small and Medium Enterprise. It has many benefits as it is given higher preference in terms of Government License and Certification. MSME also avails benefits in bank loans as compared to the interest paid on regular basis.

Role of NBFC P2P in India’s Economic Development

It helps in the supply of credit in the economic growth of economy, and it helps youth as it helps in achieving of cheaper and faster credit. The new entrants entrepreneur with the ability to repay the loan, are provided with the facility of dedicated loan products from various online platform.

In the current scenario as we can see that man and women are equal, therefore its purpose is to be to empower more and more women as it not only increases the economic development and prosperity but also a good indicator in the development of the entire household.

NBFC P2P helps in connecting and lenders with the borrowers by using the digital platform. For faster decision making and implementation, NBFC P2P has cut through end number of process which ensures interest of both lender and borrower. 24 hours banking facility is available for borrower.

Why NBFC P2P a better choice for raising funds for an MSME these days?

NBFC environment has now been changed as it provides larger opportunity for income seeking investor to diversify their portfolio which was earlier available to the Banks. Potential and e investor dealing in MSME sector are considering P2P platforms for various reasons-

Returns which are provided are highly competitive when considered against average returns delivered by other market linked investment like MFs and stock market.
In this process, both lender and borrower can choose their specified period of time between 6 to 36 months.
It provides diversification that can easily be attained by borrowers profile.
Availing more options for small business where in starting money is required for the temporary shortfall or to meet out the revenue expenses.
It bridges the gap of risk factor involved in funding the small business, as small business srae dependent of cash transactions.

Conclusion

NBFC P2P player has becoming more popular in MSME and in small business financing. It lends fund to the business of MSME by better choice to avail funds. NBFC manly focuses on young entrepreneur with potential and business ideas. It also empowers women entrepreneurs which also helps in increasing and improving economic growth of the country. Therefore, it can e said that P2P is the better choice for availing funds to meet out the revenue expenses and working capital requirement.

May 16, 2019

Advantages of NBFC Registration in India have over Nidhi Companies?

NBFC and Nidhi Companies are seen to be functioning at larger and smaller platforms respectively. In this blog we will discuss what Nidhi company do not have privilege to perform but NBFCs have.

Below are the privileges of NBFCs over Nidhi Companies-

Minimum capital of Rs. 5 Lakh is required for starting of the business in Nidhi Companies. Where NBFCs are governed by RBI and minimum 2 crore net worth is required in order to start the finance business.

Nidhi Company cannot do any other Business- If you have a Nidhi company you carry out the business of chit funds, hire purchase finance, lease finance etc. therefore, Nidhi companies carries a predefined business and is not allowed to pursue the business of any other type. And in order to do business of chit funds and other separate business, then separate License is required to take for pursuing such business.

Cannot open a Branch before three years- For opening a Nidhi Company in india, then the company must earn profits continuously for 3 years and after that only they are allowed to open a Branch. It is one of the mandatory condition and it cannot be compromised even if you have sought permission from the Registrar of Companies.

No Provision of Preference Share Capital- In Nidhi Company raising funds by way of preference share capital is not allowed.

Dealing with members only- Nidhi Company are not allowed to deal with a person who is not a part of the company.

No advertisement or solicitation- Ndhi Company cannot advertise or solicit any person for deposits.

No Brokerage or Incentive- Nidhi companies cannot pay any brokerage or incentive to any person rather they can hire employees on fixed salary basis as it is not restricted by law.

Cannot open a current account- Nidhi Companies are not allowed to open a current account with members. It is considered as mutual benefit company and hence government does not want these Nidhi companies to commercialize.

No service charge on the membership- While issuing any shares, nidhi Company cannot charge any service charge from its members.

No Partnership is allowed- Nidhi companies are not allowed to enter into a Partnership firm for the purpose of borrowing or lending activities.

Limited within a State- Nidhi companies are not allowed to open a account or branch outside the state of functioning.

Cannot add Body Corporate- Nidhi Companies cannot add any body corporate like Private Limited companies do, because the members of Nidhi companies cannot accept deposit from these Body corporate.

Conclusion

Nidhi Companies have lots of Limitations in india before for its application, therefore it is always advisable to seek permission of an expert to guide for the Application of Nidhi company License. whereas , NBFC in India offers a wide range of financial services such as loans, chit-funds, and these are different from banks. NBFCs plays a very crucial role in a developing country like us. Many economists have explained that NBFCs are very important for our economy to grow. For NBFC Registration or any information regarding NBFC and Nidhi Company Registration please contact BIATConsultant.