NBFC Project Report by MS. Sonia Jaria

PROJECT REPORT – Non-Banking Financial Company (NBFC)
INDEX
S.No. Subject Page No.
1 Meaning of NBFC 3
2 Classification of NBFCs 4-6
3 Types of NBFC 6-7
4 Procedure of formation of NBFC 8
An indicative list of documents /
5 information to be furnished along with 9 - 14
the application
Requirements to be complied with and
documents to be submitted to RBI by
6 Companies for obtaining Certificate and 14 - 20
Registration from RBI as Core
Investment Company (CIC)
Details Analysis w.r.t documents to be
7 21 - 24
submitted
Returns / Forms required to be
8 25 - 28
submitted periodically
9 Auditors’ Report 28 - 29
Concentration of Credit /
10 30
Investment(NBFC-D and NBFC-ND-SI)
Certain disclosures should be made in
11 the Balance Sheet as per format 30 - 31
prescribed
12 Calculation of CRAR 31 - 33
13 Recent Amendments 33 - 34
I. MEANING OF NBFC
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A Non-Banking Financial Company (NBFC) is a company registered

under the Companies Act, 1956 or the Companies Act, 2013 and is
engaged in the business of loans and advances, acquisition of
shares/stock/bonds/debentures/securities issued by Government or
local authority or other securities of like marketable nature, leasing,
hire-purchase, insurance business, chit business but does not include
any institution whose principal business is that of agriculture activity,
industrial activity, sale/purchase/construction of immovable property.
A non-banking institution which is a company and which has its
principal business of receiving deposits under any schemeor
arrangement or any other manner, or lending in any manner is also a
non-banking financial company (Residuary non-banking company).
Section 45-IA of the RBI Act,1934

No NBFC shall commence or carry on the business of Non- Banking
Financial Institution without obtaining a Certificate of Registration
issued under this Chapter (Chapter –IIIB) and not having a Net Owned
Fund of rupees two hundred lakhs.
Section 45I(f) of the RBI Act, 1934
“Non-banking financial company” means –
 a “Financial Institution” which is a company;
 a Non-Banking Institution which is a company and which has as its

Principal Business the receiving of deposits, under any scheme or
arrangement or in any other manner, or lending in any manner;
 such other Non-Banking Institution or class of such institutions, as

RBI specifies
45-IA of the RBI Act,1934 that no NBFC shall commence or carry on the
business of Non- Banking Financial Institution without obtaining a
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Certificate of Registration issued under this Chapter (Chapter –IIIB)and

not having a Net Owned Fund of rupees two hundred lakhs.
“NON-BANKING INSTITUTION”
MEANS A COMPANY, CORPORATION OR CO-OPERATIVE SOCIETY
II. CLASSIFICATION OF NBFCS

Mainly there are following types of NBFCs:
a) Asset Finance Company
i. Equipment Leasing
ii. Hire Purchase Finance
Asset Finance Company (AFC) would be defined as any company
which is a financial institution carrying on as its principal business
the financing of physical assets supporting productive / economic
activity.
Principal business - aggregate of financing real/physical assets
supporting economic activity and income arising therefrom is not
less than 60% of its total assets and total income respectively.
The onus of including only eligible assets for the purpose of
classification as AFC shall be that of the company concerned.
b) Investment Company
Investment Companies (IC) means any company which is a financial
institution carrying on as its principal business of acquisition of
securities.
c) Loan Company
Loan Companies (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.
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d) Systemically Important Core Investment Company (CIC-ND-SI)

CIC-ND-SI is an NBFC carrying on the business of acquisition of
shares and securities which satisfies the following conditions:-
 it holds not less than 90% of its Total Assets in the form of
investment in equity shares, preference shares, debt or loans in
group companies;
 its investments in the equity shares (including instruments
compulsorily convertible into equity shares within a period not
exceeding 10 years from the date of issue) in group companies
constitutes not less than 60% of its Total Assets;
 it does not trade in its investments in shares, debt or loans in
group companies except through block sale for the purpose of
dilution or disinvestment;
 it does not carry on any other financial activity referred to in
Section 45I(c) and 45I(f) of the RBI act, 1934 except investment
in bank deposits, money market instruments, government
securities, loans to and investments in debt issuances of group
companies or guarantees issued on behalf of group companies;
 Its asset size is Rs 100 crore or above; and
 It accepts publicfund.
e) Infrastructure Finance Companies

IFC is a non-banking finance company:
 which deploys at least 75 per cent of its total assets in
infrastructure loans;
 has a minimum Net Owned Funds of Rs. 300 crore;
 has a minimum credit rating of ‘A ‘or equivalent; &
 And a CRAR of 15%.
f) Non-Banking Financial Company – Factors (NBFC-Factors)

NBFC-Factor is a non-deposit taking NBFC engaged in the principal
business of factoring. The financial assets in the factoring business
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should constitute at least 75 percent of its total assets and its

income derived from factoring business should not be less than 75
percent of its gross income.
g) Non-Banking Financial Company - Micro Finance Institution

(NBFC-MFI)
NBFC-MFI is a non-deposit taking NBFC having not less than 85%of
its assets in the nature of qualifying assets which satisfy the
following criteria:
 loan disbursed by an NBFC-MFI to a borrower with a rural
household annual income not exceeding Rs. 60,000 or urban and
semi-urban household income not exceeding Rs. 1,20,000;
 loan amount does not exceed Rs. 35,000 in the first cycle and Rs.
50,000 in subsequent cycles;
 total indebtedness of the borrower does not exceed Rs. 50,000;
 tenure of the loan not to be less than 24 months for loan amount
in excess of Rs. 15,000 with prepayment without penalty;
 loan to be extended without collateral;
 aggregate amount of loans, given for income generation, is not
less than 75 per cent of the total loans given by the MFIs;&
 Loan is repayable on weekly, fortnightly or monthly installments
at the choice of the borrower.
h) Infrastructure Debt Funds (IDF-NBFC)

IDF-NBFC is a company registered as NBFC to facilitate the flow of
long term debt into infrastructure projects. IDF-NBFC raise
resources through issue of Rupee or Dollar denominated bonds of
minimum 5 year maturity. Only Infrastructure FinanceCompanies
(IFC) can sponsor IDF-NBFCs
III. TYPES OF NBFC

a) Deposit accepting NBFCs.
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b) Non deposit Accepting NBFCs

 Systemically important (SI)
 Not systemically important NBFCs
Criteria for deciding NBFC-ND-SI (RBI/2013-14/45)

All NBFCs – ND with an asset size of Rs. 100 crore and more as per
the last audited balance sheet will be considered as a systemically
important NBFC – ND (NBFC-ND-SI).
A non-deposit taking NBFC with an asset size of less than Rs. 100
crore as on balance sheet date might subsequently add on assets
before the next balance sheet date due to several reasons including
business expansion plan. It is clarified that once an NBFC reaches an
asset size of Rs. 100 crore or above, it shall come under the
regulatory requirement for NBFCs-ND-SI as stated above, despite not
having such assets as on the date of last balance sheet. Therefore, it is
advised that all such non-deposit taking NBFCs may comply with RBI
regulations issued to NBFC-ND-SI from time to time, as and when
they attain an asset size of Rs. 100 crore, irrespective of the date on
which such size is attained.
It is further observed that in a dynamic environment, the asset size of

a company can fall below Rs 100 crore in a given month, which may
be due to temporary fluctuations and not due to actual downsizing. It
is clarified that in such a case the company may continue to submit
the Monthly return on Important Financial Parameters to Reserve
Bank of India and to comply with the extant directions as applicable
to NBFC-ND-SI, till the submission of their next audited balance sheet
to Reserve Bank of India and a specific dispensation is received from
the Bank in this regard.
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IV. PROCEDURE OF FORMATION OF NBFC

Steps Required For Formation Of New NBFC:
STEP – 1
The first step is to form a new Company registered under the
Companies Act, 1956 or the Companies Act, 2013. The name must
reflect the character of an NBFC. Words such as Investment, Finvest,
Finstock, Finance etc. may be used as part of the name. In general, RBI
does not allow names which are not reflecting the characteristics of
NBFC.
STEP – 2
Minimum Net Owned Fund: After the incorporation of a new company
the Paid up Equity Capital of the Company should suitably rose either at
par or premium so as to attain a minimum Net Owned Fund of Rs. 2
crores. The Capital to be raised here should be Equity Share Capital and
not Preference Share Capital.
STEP – 3
Opening of a Bank Account: The entire sum of Rs. 2 crores should be
kept in a bank in a Deposit Account free from all liens. Normally funds
are kept in Fixed Deposit. The RBI at the time of considering the
application for the grant of Certificate of Registration verifies the
deposits held by the Company with the Bankers.
STEP – 4
The NBFC Company is required to submit its application online for
registration by accessing RBI’s secured website. The company can then
download suitable application form (i.e. NBFC or SC/RC) from the above
website, key in the data and upload the application form.
The company would then get a Company Application Reference Number

for the COR application filed on-line. Thereafter, the company has to
submit the hard copy of the application form (indicating the Company
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Application Reference Number of its on-line application) in duplicate,

along with the supporting documents as prescribed in the form, to the
concerned Regional Office.
An indicative list of documents/information to be furnished along

with the application.
(All documents/information is to be submitted in duplicate)
Requirements to be complied with and documents to be

No. submitted to RBI by Companies for obtaining certificate and
Registration from RBI as NBFC
1. Minimum NOF requirement Rs. 200 lakh.
2. Application to be submitted in two separate sets tied up properly in

two separate files and properly page numbered.
3 Identification particulars (Annex I).
4 Statement on prudential norms (Annex II).
5 Information about the management (Annex III)
6 Details of change in the management of the company during last

financial year till date if any and reasons thereof.
7 Certified copies of Certificate of Incorporation and Certificate of

Commencement of Business in case of public limited companies.
8 Certified copies of up-to-date Memorandum and Articles of Association

of the company.
9 Details of clauses in the memorandum relating to financial business.
10 Details of changes in the Memorandum and Articles of Association duly

certified.
11 Copy of PAN/CIN allotted to the company.
12 Annex II to be submitted duly signed by the director/Authorized

signatory and certified by the statutory auditors.
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Annex III (directors’ profile) to be separately filled up and signed by

13 each director. Care should be taken to give details of bankers in respect
of firms/companies/entities in which directors have substantial
interest.
In case the directors are associated with or without substantial interest
14 (indicate %of holding in each company firm) in other companies,
indicate clearly the activity of the companies and details of their
regulators if any.
15 Certificate from the respective NBFC/s where the Directors have

gained NBFC experience.
16 Copy of PAN and DIN allotted to the Directors.
17 CIBIL Data pertaining to Directors of the company
Financial Statements of the last 2 years of Unincorporated Bodies,

18 ifany, in the group where the directors may be holding directorship
with/without substantial interest.
Certificate of compliance with section 45S of Chapter IIIC of the RBI
19 Act, 1934 regarding unincorporated bodies with which director/s of
the company are associated.
Whether any prohibitory order was issued in the past to the company
20 or any other NBFC/RNBC with which the directors/promoters etc.
were associated? If yes, details thereof.
Whether the company or any of its directors was/is involved in any
21 criminal case, including under section 138(1) of the Negotiable
Instruments Act? If yes, details thereof.
22 Board Resolution specifically approving the submission of the

application and its contents and authorizing signatory.
Board Resolution to the effect that the company has not accepted any
23 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 in writing.
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Board resolution stating that the company is not carrying on any NBFC
24 activity/stopped NBFC activity and will not carry on/commence the
same before getting registration from RBI.
25 Certified copy of Board resolution for formulation of “Fair Practices

Code”
26 Statutory Auditors Certificate certifying that the company is/does not

accept/is not holding Public Deposit.
27 Statutory Auditors Certificate certifying that the company is not

carrying on any NBFC activity.
28 Statutory Auditors Certificate certifying net owned fund as on date of

the application.
Details of Authorized Share Capital and latest shareholding pattern of
the company including the percentages. Documentary evidence for
change in shareholding pattern, if undergone. If there are any NBFC
29 corporate share holders, certificates from their statutory auditors
regarding the adequacy of statutory NOF post investment. Also,
provide details about the line of activity of other corporate stake
holders.
30 Copy of Fixed Deposit receipt & bankers certificate of no lien indicating

balances in support of NOF
31 Details of infusion of capital if any during last financial year together

with the copy of return of allotment filed with Registrar of Companies.
32 A detail of the bank balances/bank accounts/complete postal address

of the branch/bank, loan/credit facilities etc. availed.
Details of unsecured loans if anyrose by the company from others
33 (including the directors) during the year and if these fall in the
exempted category of Public deposits certified by the Auditor.
A certificate of Chartered Accountant regarding details of
34 group/associate/subsidiary/holding/related companies is submitted.
('Companies in the group" have been exhaustively defined in para 3(1)
b of Notification No. DNBS.(PD) 219/CGM (US)-2011 dated January 05,
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2011 as an arrangement involving two or more entities related to each

other through any of the following relationships, viz; subsidiary-parent
(defined in terms of AS-21), Joint Venture (defined in terms of AS 27),
Associate (defined in terms of AS 23), promoter-promote (as provided
in the SEBI-Acquisition of shares and takeover) Regulations, 1997) for
listed companies, a related party (defined in terms of AS 18) Common
brand name, and investment in equity shares of 20% and above.)
Details should include names of the company, its activity, whether it is
an NBFC or have other regulators like SEBI/IRDA/FMC/NHB/Foreign
Regulators. If they are unregulated give the details of their activities,
principal banker’s name, address, account no. Whether the names of
these companies are appearing in the balance sheet of the applicant
company. If not, indicate why they are not appearing. Whether
overseas group companies were established under general permission
route or under approval from appropriate authority if any. If there are
other NBFCs in the group, justification of having another NBFC.
35 Brief background note on the activities of the company during the last
three years and the reasons for applying for NBFC registration.
Whether the company has applied to RBI in the past for registration,
ifrejected, give full details. If not applied to RBI earlier, whether the
company was doing NBFI activities without COR.If yes, indicate
36 reasons for same.Whether they have completely stopped NBFI
activities now and whether that has been certified by their auditor.
Also, submit a letter seeking to be condoned for violation of Sec 45 IA if
the company had conducted NBFI business detailing the
circumstances.
Last three years Audited balance sheet and Profit & Loss account along
37 with directors &auditor’s report or for such shorter period as are
available (for companies’ already in existence).
Business plan of the company for the next three years giving details of
38 its (a) thrust of business; (b) market segment; and (c) projected
balance sheets, Cash flow statement, asset/income pattern statement
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without any element of public deposits.

Source of the startup capital of the company substantiated with
39 documentary evidence. Provide Self attested Bank Statement/IT
returns etc.
40 Details of mergers and acquisition with/of other companies if any

together with supporting documents.
Is the company engaged in any capital market activity? If so, whether
41 there has been any non-compliance with SEBI Regulations? (Statement
to be certified by Auditors).
Whether the company was granted any permission by FED to function
42 as Full-fledged Money Changers? If so, copy of the RBI letter granting
the permission.
If there is FDI in the company, its percentage (submit FIRC in support
thereof) and whether it fulfills the minimum capitalization norms or
not (also submit FC_GPRs).
(i) Has the FDI been brought in with FIPB approval (Copy of approval
to be submitted)?
(ii) Is the foreign entity contributing the FDI subject to supervision in
its home country (if yes, name, address and email id of the regulator).
(iii) If not, mention legal status, viz, statutes under which it was
established, its statutory obligations, procedures under which it was
43 established, whether listed on stock exchange etc.
(iv) The particulars of approval of Foreign Exchange Department (FED)
if any obtained/copies of Foreign Inward Remittance Certificate in r/o
Foreign Direct Investment if any, received by the applicant company
are furnished.
(v) Activities undertaken, details of regulator of group/associate
companies doing financial activities which are regulated either in the
home country or elsewhere, if any.
(v) If any group/ associate company is operating in India, details such

as its activities, its partners or associates, regulator/s etc. may be
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furnished.
Declaration by the company to own electronic infrastructure and its

44 capability regarding electronic submission of data through the internet
as and when required by Reserve Bank of India. Email id of the
company should also be provided.
Are there are any incidents of non-compliance with the directions of
45 Revenue Authorities or any other statutory authority by the applicant
company, its holding company/ subsidiaries, If yes, give particulars,
else report "Nil"
Requirements to be complied with and documents to be

No. submitted to RBI by Companies for obtaining certificate and
Registration from RBI as Core Investment Company (CIC)
1 Details of access to Public Funds.
If the company does not have public funds but intends to access
public funds anytime in the future and therefore applying for the
2. CoR, they have to submit the Board Resolution to the effect that
they intend to raise resources through public funds at a future
date.
3 Application to be submitted in two separate sets tied up properly

in two separate files and properly page numbered.
4 Identification particulars (Annex I).
5 Statement on prudential norms (Annex II).
6 Information about the management (Annex III)
7 Details of change in the management of the company during last

financial year till date if any and reasons thereof.
8 Certified copies of Certificate of Incorporation and Certificate of

Commencement of Business in case of public limited companies.
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9 Certified copies of up-to-date Memorandum and Articles of

Association of the company.
10 Details of clauses in the memorandum relating to financial

business.
11 Details of changes in the Memorandum and Articles of Association

duly certified.
12 Copy of PAN/CIN allotted to the company.
13 Annex II to be submitted duly signed by the director/Authorized

signatory and certified by the statutory auditors.
Annex III (directors’ profile) to be separately filled up and signed
14 by each director. Care should be taken to give details of bankers in
respect of firms/companies/entities in which directors have
substantial interest.
In case the directors are associated with or without substantial
15 interest (indicate %of holding in each company firm) in other
companies, indicate clearly the activity of the companies and
details of their regulators if any.
16 Certificate from the respective NBFC/s where the Directors have

gained NBFC experience.
17 Copy of PAN and DIN allotted to the Directors.
18 CIBIL Data pertaining to Directors of the company
Financial Statements of the last 2 years of Unincorporated Bodies,

19 if any, in the group where the directors may be holding
directorship with/without substantial interest
Certificate of compliance with section 45S of Chapter IIIC of the
20 RBI Act, 1934 regarding unincorporated bodies with which
director/s of the company are associated.
Whether any prohibitory order was issued in the past to the
21 company or any other NBFC/RNBC with which the
directors/promoters etc. were associated? If yes, details thereof.
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Whether the company or any of its directors was/is involved in

22 any criminal case, including under section 138(1) of the
Negotiable Instruments Act? If yes, details thereof.
23 Board Resolution specifically approving the submission of the

application and its contents and authorizing signatory.
Board Resolution to the effect that the company has not
24 accepted/solicited any public deposit and will not accept the same
in future without the prior approval of Reserve Bank of India in
writing.
Board resolution stating that the company was not trading/ will
25 not trade in its investments in shares, bonds, debentures, debt or
loans in group companies except through block sale for the
purpose of dilution or disinvestment.
Board resolution stating that the company does not carry on any
other financial activity referred to in Section 45I(c) and 45I(f) of
the Reserve Bank of India Act, 1934 except
investment in
i) bank deposits,
26 ii) money market instruments, including money market mutual
funds
iii) government securities, and
iv) bonds or debentures issued by group companies,
v) granting of loans to group companies and
vi) issuing of guarantees on behalf of group companies.
27 Certified copy of Board resolution for formulation of “Fair

Practices Code”
28 Statutory Auditors Certificate certifying that the company is/does

not accept/is not holding Public Deposit.
Statutory Auditors Certificate certifying that the company had not
29 traded, during the year in its investments in shares, bonds,
debentures, debt or loans in group companies except through
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block sale for the purpose of dilution or disinvestment.

Statutory Auditors Certificate certifying that the company does not
carry on any other financial activity referred to in Section 45I(c)
and 45I(f) of the Reserve Bank of India Act, 1934 except
investment in
i) bank deposits,
30 ii) money market instruments, including money market mutual
funds
iii) government securities, and
iv) bonds or debentures issued by group companies,
v) granting of loans to group companies and
vi) Issuing of guarantees on behalf of group companies.
31 Statutory Auditors Certificate certifying Average Market Price of

quoted investments.
32 Statutory Auditors Certificate certifying the net asset size of the

company.
33 Statutory Auditors Certificate certifying investment in group

companies as percent of its Net Assets.
Statutory Auditors Certificate certifying investments in equity
34 shares (including instruments compulsorily convertible into
equity shares within a period not exceeding 10 years from the date
of issue) in group companies as percent of its net assets
Details of Authorised Share Capital and latest shareholding pattern
of the company including the percentages. Documentary evidence
for change in shareholding pattern, if undergone. If there are any
35 NBFC corporate shareholders, certificates from their statutory
auditors regarding the adequacy of statutory NOF post investment.
Also, provide details about the line of activity of other corporate
stake holders.
36 Details of infusion of capital if any during last financial year

together with the copy of return of allotment filed with Registrar
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of Companies.
37 Details of the bank balances/bank accounts/complete postal

address of the branch/bank, loan/credit facilities etc. availed.
Details of unsecured loans if any, raised by the company from
38 others (including the directors) during the year and if these fall in
the exempted category of Public deposits certified by the Auditor.
group/associate/subsidiary/holding/related companies is to be
submitted.
(For the purposes of determining whether a company is a CIC/CIC-
ND-SI, 'companies in the group" have been exhaustively defined in
para 3(1) b of Notification No. DNBS.(PD) 219/CGM (US)-2011
dated January 05, 2011 as an arrangement involving two or more
entities related to each other through any of the following
relationships, viz; subsidiary-parent (defined in terms of AS-21),
Joint Venture (defined in terms of AS 27), Associate (defined in
terms of AS 23), promoter-promotee (as provided in the SEBI-
39 Acquisition of shares and takeover) Regulations, 1997) for listed
companies, a related party (defined in terms of AS 18) Common
brand name, and investment in equity shares of 20% and above.)
Details should include names of the company, its activity, whether
it is an NBFC or have other regulators like
SEBI/IRDA/FMC/NHB/Foreign Regulators. If they are unregulated
give the details of their activities, principal banker’s name,
address, account no. Whether the names of these companies are
appearing in the balance sheet of the applicant company. If not,
indicate why they are not appearing. Whether overseas group
companies were established under general permission route or
under approval from appropriate authority if any. If there are
other NBFCs in the group, justification of having another NBFC.
40 Details of other CICs in the group. If they are not registered with
the Bank, reasons for the same may be given. Justification of
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having another CIC in the group also should be provided.
41 Brief background note on the activities of the company during the

last three years.
Last three years Audited balance sheet and Profit & Loss account
42 along with directors &auditor’s report or for such shorter period
as are available (for companies’ already in existence).
Business plan of the company for the next three years giving
43 details of its (a) thrust of business; (b) market segment; and (c)
projected balance sheets, Cash flow statement, asset/income
pattern statement.
44 Source of the startup capital of the company substantiated with

documentary evidence. (Only for the new companies).
45 Details of mergers and acquisition with/of other companies if any

together with supporting documents.
Is the company engaged in any capital market activity? If so,
46 whether there has been any non-compliance with SEBI
Regulations? (Statement to be certified by Auditors).
Whether the company was granted any permission by FED to
47 function as Full-fledged Money Changers? If so, copy of the RBI
letter granting the permission.
If there is FDI in the company, its percentage (submit FIRC in
support thereof) and whether it fulfills the minimum capitalization
norms or not (also submit FC_GPRs).
(i) Has the FDI been brought in with FIPB approval (Copy of
approval to be submitted)?
48 (ii) Is the foreign entity contributing the FDI subject to
supervision in its home country (if yes, name, address and email id
of the regulator).
(iii) If not, mention legal status, viz, statutes under which it was
established, its statutory obligations, procedures under which it
was established, whether listed on stock exchange etc.
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(iv) The particulars of approval of Foreign Exchange Department

(FED) if any obtained/copies of Foreign Inward Remittance
Certificate in r/o Foreign Direct Investment if any, received by the
applicant company are furnished.
(v) Activities undertaken, details of regulator of group/associate
companies doing financial activities which are regulated either in
the home country or elsewhere, if any.
(v) If any group/ associate company is operating in India, details
such as its activities, its partners or associates, regulator/s etc.
may be furnished.
Declaration by the company to own electronic infrastructure and
49 its capability regarding electronic submission of data through the
internet as and when required by Reserve Bank of India. Email id
of the company should also be provided.
A company which is already in existence and whose (i) minimum
Capital Ratio in terms of Adjusted Net Worth is less than 30% of
its aggregate risk weighted assets on Balance Sheet and risk
adjusted value of off-balance sheet items as on the date of the last
50 audited Balance Sheet, and/or (iii) a Leverage Ratio where its
outside liabilities are exceeding 2.5 times its Adjusted Net Worth
as on the date of the last audited Balance Sheet, as on the date of
application, may also furnish a time-bound programme as to how
it proposes to adhere to these requirements.
A company which proposes to become a CIC-ND-SI but does not
51 qualify in terms of 90% of net assets under investments may also
give a time bound action plan as to how it would achieve such
eligibility.
Are there are any incidents of non-compliance with the directions
52 of Revenue Authorities or any other statutory authority by the
applicant company, its holding company/ subsidiaries, If yes, give
particulars, else report "Nil"
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“Note:
(1) The Above Checklist is indicative and not exhaustive. Bank can,if
necessary, call for any further documents to satisfy themselves on the
eligibility for obtaining registration as NBFC.
(2) In the event of the Bank calling for further documents in addition to
those mentioned above, the applicant company is supposed to respond
within a stipulated time of one month failing which the original COR
application may be returned to the company for resubmission afresh with
the required information/documents. “
The company can then check the status of the application based on the
acknowledgement number. The Bank would issue Certificate of
Registration after satisfying itself that the conditions as enumerated in
Section 45-IA of the RBI Act, 1934 are satisfied.
Detail Analysis w.r.t Documents to be submitted

The Memorandum of Association of the applicant company should have
enabling clause/s for conducting of NBFI business by the company
Certified copy of Certificate of Incorporation (bearing the signature of
the Registrar of Companies) Banker’s Report in a sealed cover. A copy of
the same should be send to the General Manager, RBI by the bank at the
request of the company Banker’s Reports in respect of companies in
which the directors have substantial interest as indicated against items
Nos. 14 & 15 of Annexures-III. Registration number and nature of
business activities of the companies in which the Directors have
substantial interest should also be furnished Banker’s Report in respect
of group/subsidiary/holding companies if any, of the applicant
company.
Details of the interest held by Directors in such companies are to be
furnished Certified copy of Board Resolution approving the submission
of application for COR Certified copy of the audited balance sheet and
profit & loss account of the company for the last three years (in case of
Sonia Jaria – 220746767/08/2009 Page 21

existing companies intending to commence NBFI business) and

proforma balance sheet and profit & loss account as on the date on
which the statement of capital funds and risk assets is furnished in
Annexure-II to the application is submitted.
Brief history of Company along with summary of financial for last five
years Business Plan of the company for the next three years giving
details of its thrust of business, market segment and projection of
investments and income together with projected Balance Sheet and
Profit & Loss Account for the next three years.
Auditors’ Certificate and extracts of Bank statement regarding receipt of
share premium, if any.
Certified copy of Board Resolution that the company has not accepted
any public deposits in the past/does not hold any public deposits as on
date and will not accept the deposits in future without prior approval of
the Bank Certified copy of Board Resolution that the company has not
conducted/commenced NBFI business and also shall not
conduct/commence NBFI business without obtaining Certificate of
Registration from the Bank Auditors’ Certificate to the effect that the
Auditors’ Certificate to the effect that the Company has not accepted/is
not holding any public deposits as on date and will not accept such
deposits in future without prior approval of the Bank Company is not
carrying on any NBFI activity as on date Company has an NOF of Rs.200
lakh as on date.
group/associate/subsidiary/holding companies along with details of
investments in other NBFCs as shown in the Proforma Balance Sheet
Details of Book Value of bonds/debentures/outstanding loans and
advances (including hire purchase & lease finance) made to and
deposits with § Subsidiaries § Group companies as on the Proforma
Balance Sheet (Annexure-II) duly certified by the Auditor Details of cost
and market/Break Up Value of Quoted/unquoted investments including
current investments as on the Proforma Balance Sheet (Annexure-II)
duly certified by the Auditor The details of experience of directors in
NBFI business as indicated against Item No. 12 of Annexure-III are to be
Sonia Jaria – 220746767/08/2009 Page 22

submitted Name of the companies indicated against Item No. 9 of

Annexure-III, in which the directors of the applicant company are the
directors, are NBFC registered with the Reserve Bank The Declarations
of the directors regarding their non-association with the
unincorporated bodies under Section 45S of the Reserve Bank of India
Act, 1934 are submitted.
The particulars of approval of Foreign Exchange Department (FED) if
any obtained/copies of Foreign Inward Remittance Certificates in
respect of Foreign Direct Investment if any, received by the applicant
company are to be furnished.
A Board Resolution to the effect that the company has formulated a Fair
Practise Code and copy whereof should be enclosed and the same would
be implemented on grant of COR, If Company does not have a website it
can submit information through e-mail or any other mode through
internet – a statement in this regard Documentary evidence like
certified Xerox copy of electric bill/telephone bill in the name of the
applicant company. Whether the Company is regulated by other
regulators like SEBI, IRDA etc Income Tax PAN in respect of the
company as well as all the directors.
In case of amalgamation with other companies, copy of High Court
Order allowing the above amalgamation together with copies of Form
No. 21 (INC-28) filed with Registrar of Companies.
The current Net Owned Fund (NOF) of all the NBFCs subscribing to the
capital of the applicant company, the computation being duly certified
by the Statutory Auditor Documents called by this Deptt. In respect of
NBFCs having common Directors with the Applicant Company and
subscriber/investor NBFCs, must be submitted to the satisfaction of
Company Monitoring Division.
STEP-5
Filing of some additional Documents: In addition to the documents

required to be enclosed along with Application Form the following
should also be enclosed: Copy of Form-32 (DIR 12) of all present
Sonia Jaria – 220746767/08/2009 Page 23

directors with receipt Copy of Form-18 (INC-22) of present situation of

Registered Office, with receipt. Copy of Form-2(PAS-3) Return of
allotment of Shares, with receipt.Experience Certificate or Details of
Experience of Directors, if any, in NBFC Business. Bankers Report in the
format prescribed by RBI with the request to Bank that original should
be directly sent to RBI. Bankers Report of all the Firms/Company/
Proprietorship Concern in which director holds substantial interest
Board Resolutions in the matter of Application for granting Certificate of
Registration, Non- Acceptance of Public Deposits and Non Carrying
business of Non-Banking Financial Institution without Certificate of
Registration. Board Resolution adopting a Fair Practices Code and a
copy of the said Code. Declaration from Directors to give affect that they
are not associated with unincorporated bodies U/s 45-S of RBI Act,
1934.
The application is to be filed with the Regional Office of RBI whose

jurisdiction, the registered office of the Company falls.
STEP -6
Granting of Certificate: After the application is filed, the same is

examined by RBI and further documents and clarifications may be
sought from time to time. Finally if RBI considers that the application is
complete in all respects and all required documents and information is
furnished to its satisfaction , it may grant Certificate of Registration to
carry on the business of NBFC not accepting public deposits or else the
application is returned. It may be noted that when applications are filed
at the Regional Office, they vet the application and if everything is found
by them in order they send the same to Central Office for further
examination and approval. However, if the application is not in order
they send back the application and pointing out the defects. At this stage
the applicant should not be disheartened and the defects should be
cured and the application should again be filed. Finally if Central Office
approves the Application, the Regional Office will issue certificate of
Registration.
Sonia Jaria – 220746767/08/2009 Page 24

V. RETURNS/FORMS REQUIRED TO BE SUBMITTED PERIODICALLY:-

Reporting dates and Due dates for Returns to be submitted by NBFCs
Sl. Name of the Short Periodicity Reference Reporting Due Purpose To be

No. Return Name Date Time on submitted
by
1. Quarterly Returns NBS1 Quarterly 31st 15 days 15th Details of NBFCs-D
By deposit taking March/ April/ Assets And
NBFCs 30th June/ 15th Liabilities
(As required by 30th Sept/ July/
“Non-Banking 31st Dec 15th
Financial Oct/
Companies 15th
Acceptance of Jan
Public Deposits
(Reserve Bank)
Directions,
1998”.)
2. Quarterly NBS2 Quarterly 31st 15 days 15th Capital NBFCs-D
Statement of March/ April/ Funds, Risk
Capital Funds, 30th June/ 15th Assets, Asset
Risk Assets etc as 30th Sept/ July/ Classification
required under 31st Dec 15th etc
the Non-Banking Oct/
Financial 15th
Companies Jan
Prudential Norms
(Reserve Bank)
Directions 2007
By deposit taking
NBFCs
3. Quarterly Return NBS3 Quarterly 31st 15 days 15th Statutory NBFCs-D
on Statutory March/ April/ Liquid Assets
Liquid Assets as 30th June/ 15th
per Section 45 IB 30th Sept/ July/
of the Act By 31st Dec 15th
Deposit Taking Oct/
Sonia Jaria – 220746767/08/2009 Page 25

NBFCs 15th
Jan
4. Annual Return on NBS4 Annual March 31 30 days May Details of NBFCs
Repayment of 01 Public holding
Deposits by the Deposits, public
Rejected Other deposits
Companies Liabilities whose
holding Public application
Deposits (The for
return was Certificate
subsequently of
simplified for Registration
better response) under
Section 45-
IA of
RBI Act,
1934 have
been
rejected
5. Monthly Return NBS6 Monthly As at the 7 days 7th Details of NBFCs-D
on Capital Market end of the day of Capital
Exposure month next Market
month Exposure
6. Quarterly Return NBS7 Quarterly 31st 15 days 15th Capital NBFCs-ND-
of Capital Funds, March/ April/ Funds, Risk SI
Risk-Asset Ratio 30th June/ 15th Assets, Risk
from NBFCs-ND- 30th Sept/ July/ Weighted off-
SI (Supervisory 31st Dec 15th balance sheet
Return) Oct/ items (Non-
15th Funded
Jan Exposures),
Asset
Classification
etc.
7. Asset-Liability ALM Half yearly 31st 1 month 30th Structural NBFCs-D
Management March/ April/ Liquidity, having
(ALM) Return 30th Sept 30th Short-term public
Oct dynamic deposit of
Sonia Jaria – 220746767/08/2009 Page 26

liquidity, Rs 20 crore
Interest Rate and/or
sensitivity asset size of
etc. more than
Rs. 100
crore
8. A Statement of ALM-1 Monthly As at end 10 days 10th Short-term NBFC-ND-SI
short term of the day of dynamic
dynamic liquidity month next liquidity
in format ALM - month
NBS-ALM1
9. Statement of ALM-2 Half yearly 31st 20 days 20th Structural NBFC-ND-SI
structural March/ April/ liquidity
liquidity in format 30th Sept 20th
ALM – NBS-ALM2 Oct
10. Statement of ALM-3 Half yearly 31st 20 days 20th Interest Rate NBFC-ND-SI
Interest Rate March/ April/ sensitivity
Sensitivity in 30th Sept 20th
format ALM-NBS- Oct
ALM3.
11. Monthly Return 100 Monthly end of 7days 7th of Sources and NBFC-ND-SI
on Important Crore every next Application
Financial NBFCs- month month of Funds,
Parameters of ND-SI Profit and
NBFCs not Loss Account,
accepting/holding Asset
public deposits Classification,
and having asset Bank's/FIs
size of Rs.100 exposure on
crore and above the company,
Details of
Capital
Market
Exposure,
Foreign
Sources etc.
12. Quarterly return Quarterly. 31st within a Basic
to be submitted March/ period of information
Sonia Jaria – 220746767/08/2009 Page 27

by non-deposit 30th June/ one month like name of

taking NBFCs 30th Sept/ from the the company,
with asset size of 31st Dec close of address. NOF,
Rs 50 crore and the profit / loss
above but less quarter during the
than Rs 100 crore, last three
years
13. Quarterly Return Quarterly. 31st within a Name of the All NBFCs
to be submitted March/ period of WOS/JV,
by NBFCs having 30th June/ one month
overseas 30th Sept/ from the Country and
investment 31st Dec close of date of
the incorporation
quarter
Date of NoC
from DNBS,
Business
undertaken
Note: NBFCs-D -> Deposit taking Non-Banking Financial Companies (NBFCs);
NBFCs-ND -> Non-Deposit taking NBFCs.
NBFCs-ND-SI -> Non-Banking Financial Companies (NBFCs) not accepting/holding public deposits and
having asset sizes of Rs.100 crore and above (also termed as Systemically Important NBFCs or in short
NBFCs-ND-SI)
VI. AUDITORS’ REPORT

The auditor shall also make a separate report to the Board of Directors
of the Company Matters to be included in the auditor’s report.
The auditor’s report (Issued to Directors) on the accounts of a NBFC
shall include a statement on the following matters, namely:
A. In the case of all Non-Banking Financial Companies

I. Whether the company is engaged in the business of NBFI and
whether it has obtained a Certificate of Registration (COR) from
the Bank
II. In the case of a company holding COR issued by the Bank,
whether that company is entitled to continue to hold such
Sonia Jaria – 220746767/08/2009 Page 28

COR in terms of its asset/income pattern as on March 31st of

the applicable year.
III. If the company is classified as AFC, Whether the NBFC has been
correctly classified as AFC as defined in RBI Directions with
reference to the business carried on by it during the applicable
financial year.
B. In the case of an NBFC-ND

I. Whether the Board of Directors has passed a resolution for non-
acceptance of any public deposits.
II. Whether the company has accepted any public deposits during
the relevant period/year;
III. Compliance with the prudential norms
C. Additional Reporting in respect of NBFC-ND-SI

I. Calculation and compliance with Capital adequacy
requirements
II. Whether annual statement of capital funds, risk
assets/exposures and risk asset ratio (NBS-7) was furnished to
the bank within the stipulated period
D. Other Requirements:
I. Reasons to be stated for unfavorable or qualified statements
II. Obligation of auditor to submit an exception report to the Bank
(RBI)
Auditor to make a report to the regional office containing the details

of unfavorable or qualified statements and about the non-
compliance, as the case may be, in respect of the company.
Sonia Jaria – 220746767/08/2009 Page 29

VII. CONCENTRATION OF CREDIT/INVESTMENT (NBFC-D AND NBFC-

ND-SI)
A. To formulate a policy in respect of exposure to a single party/a
single group of parties.
B. Not to lend –
(a) To any single borrower exceeding 15% of its owned funds and
(b) to any single group of borrowers exceeding 25% of its owned
funds
Not to Invest in -
(a) The shares of another company exceeding 15% of its owned
funds
(b) The shares of single group of companies exceeding 25% of its
owned fund
C. Not to lend and Invest (loans and investments taken together)

exceeding
(a) 25% of its owned fund to a single party and
(b) 40% of its owned fund to a single group of parties
Note: Any systemically important non-deposit taking non-banking

financial company not accessing public funds, either directly or
indirectly, or not issuing guarantees may make an application to the
Bank for an appropriate dispensation consistent with the spirit of the
exposure limits.
VIII. CERTAIN DISCLOSURES SHOULD BE MADE IN THE BALANCE SHEET

AS PER FORMAT PRESCRIBED
A. For All NBFC
Provisions for bad and doubtful debts
Provisions for depreciation in investments
Sonia Jaria – 220746767/08/2009 Page 30

B. For NBFC-ND-SI
a. Capital to Risk asset ratio (CRAR)- Min. 15%
b. Exposure to real estate sector, both direct and indirect and
c. Maturity pattern of assets and liabilities
CALCULATION OF CRAR
Steps for calculation of CRAR

Step I – Find out owned funds
Step II – From Owned fund, derive Net owned fund (Tier I Capital)
Step III – Find Tier II capital
Step IV – Derive Total Risk Weighted Assets (TRWA)
TRWA = Total Risk weighted assets of B/S and Off balance sheet items
Maintenance of CRAR
CRAR (Capital to Risk Asset Ratio)

Capital in the form of Tier I and Tier II capital to be maintained
against total risk weighted assets.
A. Calculation of Tier I Capital (i.e. Net owned funds)

 Sum of
1. Share Capital (Paid up capital + Preference shares which
are compulsorily convertible into equity)
2. Free Reserves (Including General Reserves, Debenture
redemption reserves, Capital Redemption Reserves, Credit
balance in P&L Account, Other Free reserves (to be
specified))
3. Capital reserves representing surplus arising out of sale
proceeds of asset + Balance in share premium account
Sonia Jaria – 220746767/08/2009 Page 31

 Deduct from above

1. Deferred Revenue Expenditure
2. Reserves created by revaluation of assets
3. Accumulated loss balance
4. Losses in the current period and those brought forward
from previous periods
5. Book value of Intangible assets
6. Deferred Tax Asset
 Further deduct from the “Owned Funds”…

1. Investments in shares of other NBFCs, Investments in
shares, debentures, bonds, outstanding loans and advances
including hire purchase and lease finance made to and
deposits with subsidiaries and companies from the same
group exceeding, in aggregate, 10% of the owned fund
2. Perpetual debt instruments issued by a NBFC-ND-SI to the
extent not exceeding 15% of the aggregate Tier I capital -
as on 31st March of Previous Accounting Year.
The result is Tier I capital (Net Owned Fund)
B. Calculation of Tier II capital (Aggregate of Below items)

1. Preference shares other than those which are compulsorily
convertible into equity.
2. Revaluation Reserves (RR) - 45% is only taken in calculation of
tier II capital
3. General Provisions and Loss Reserves to the extent these are
notattributable to actual diminution in value or identifiable
potential loss in any specific asset and are available to meet
unexpected losses, to the extent of one and one fourth (1.25)
percent of risk weighted assets. (Include provisions on standard
assets)
Sonia Jaria – 220746767/08/2009 Page 32
4. Hybrid Debt Capital Instruments

5. Perpetual debt instruments issued by a SI-ND NBFC which is in
excess of what qualifies for Tier I Capital
6. Subordinated Debts
“Tier II cannot be greater than Tier I capital for calculation
of capital adequacy”
Important Notes for CRAR Calculation
 Netting may be done only in respect of assets where provisions

for depreciation or for bad and doubtful debts have been made.
 Can net off the amount of cash margin/caution money/security
deposits (against which right to set-off is available) held as
collateral against the advances out of the total outstanding
exposure of the borrower.
IX. Transfer of 20% profit to Special Reserves (RBI Act)
X. RECENT AMENDMENTS
A. NBFCs need to display grievance redressal mechanism and contact
details of grievance redressal officer at prominent place in
offices/branches/places of business.
B. Fair Practices Code (which should preferably in the vernacular

language as understood by the borrower) based on the guidelines
announced should be put in place by all NBFCs with the approval of
their Boards.
C. Revision in format for submission of returns for PMLA compliances

and Uploading of Reports in 'Test Mode' on FINnet Gateway for
PMLA Reporting
Sonia Jaria – 220746767/08/2009 Page 33

D. Facility to NBFC-ND-SI - Direct Access to Negotiated Dealing System-

Order Matching.
E. Change in Loan to Value ratio for companies predominantly in loan

against gold products.
F. Amendments to definition of infrastructure loan.
G. NBFCs cannot become partners in partnership firms.
H. Review of Guidelines on entry of NBFCs into Insurance Business.
I. RBI issued “NBFC (Opening of Branch/Subsidiary/Joint

Venture/Representative Office or Undertaking Investment Abroad by
NBFCs) Directions, 2011”.
J. Guidelines for Credit Default Swaps - NBFCs as users.
K. Revision in External Commercial Borrowings (ECB) Policy –

Infrastructure Finance Companies (IFCs).
L. Guidelines on classification of frauds, approach towards monitoring

of and reporting system for frauds for deposit taking NBFCs to apply
for NBFC-ND-SI also.
__________________________________________________________________
*****
Sonia Jaria – 220746767/08/2009 Page 34

NBFC Project Report by MS. Sonia Jaria

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PROJECT REPORT – Non-Banking Financial Company (NBFC)

Sonia Jaria – 220746767/08/2009 Page 2

A Non-Banking Financial Company (NBFC) is a company registered

Section 45-IA of the RBI Act,1934

Section 45I(f) of the RBI Act, 1934

“Non-banking financial company” means –

 a “Financial Institution” which is a company;

 a Non-Banking Institution which is a company and which has as its

 such other Non-Banking Institution or class of such institutions, as

Sonia Jaria – 220746767/08/2009 Page 3

Certificate of Registration issued under this Chapter (Chapter –IIIB)and

II. CLASSIFICATION OF NBFCS

Sonia Jaria – 220746767/08/2009 Page 4

d) Systemically Important Core Investment Company (CIC-ND-SI)

e) Infrastructure Finance Companies

f) Non-Banking Financial Company – Factors (NBFC-Factors)

Sonia Jaria – 220746767/08/2009 Page 5

should constitute at least 75 percent of its total assets and its

g) Non-Banking Financial Company - Micro Finance Institution

h) Infrastructure Debt Funds (IDF-NBFC)

III. TYPES OF NBFC

Sonia Jaria – 220746767/08/2009 Page 6

b) Non deposit Accepting NBFCs

Criteria for deciding NBFC-ND-SI (RBI/2013-14/45)

It is further observed that in a dynamic environment, the asset size of

Sonia Jaria – 220746767/08/2009 Page 7

IV. PROCEDURE OF FORMATION OF NBFC

The company would then get a Company Application Reference Number

Sonia Jaria – 220746767/08/2009 Page 8

Application Reference Number of its on-line application) in duplicate,

An indicative list of documents/information to be furnished along

Requirements to be complied with and documents to be

2. Application to be submitted in two separate sets tied up properly in

4 Statement on prudential norms (Annex II).

5 Information about the management (Annex III)

6 Details of change in the management of the company during last

7 Certified copies of Certificate of Incorporation and Certificate of

8 Certified copies of up-to-date Memorandum and Articles of Association

10 Details of changes in the Memorandum and Articles of Association duly

12 Annex II to be submitted duly signed by the director/Authorized

Sonia Jaria – 220746767/08/2009 Page 9

Annex III (directors’ profile) to be separately filled up and signed by

15 Certificate from the respective NBFC/s where the Directors have

17 CIBIL Data pertaining to Directors of the company

Financial Statements of the last 2 years of Unincorporated Bodies,

22 Board Resolution specifically approving the submission of the

Sonia Jaria – 220746767/08/2009 Page 10

25 Certified copy of Board resolution for formulation of “Fair Practices

26 Statutory Auditors Certificate certifying that the company is/does not

27 Statutory Auditors Certificate certifying that the company is not

28 Statutory Auditors Certificate certifying net owned fund as on date of

30 Copy of Fixed Deposit receipt & bankers certificate of no lien indicating

31 Details of infusion of capital if any during last financial year together

32 A detail of the bank balances/bank accounts/complete postal address

Sonia Jaria – 220746767/08/2009 Page 11

2011 as an arrangement involving two or more entities related to each

Sonia Jaria – 220746767/08/2009 Page 12

without any element of public deposits.

40 Details of mergers and acquisition with/of other companies if any

(v) If any group/ associate company is operating in India, details such

Sonia Jaria – 220746767/08/2009 Page 13

Declaration by the company to own electronic infrastructure and its

Requirements to be complied with and documents to be

3 Application to be submitted in two separate sets tied up properly