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by Rakesh Waghela

2.1 NBFC registration and classification

Rule summary

Section titled “Rule summary”

To carry on the business of an NBFC in India, a company must obtain a Certificate of Registration (CoR) from the Reserve Bank of India under Section 45-IA of the RBI Act, 1934. Registration is granted by RBI’s Department of Regulation (DoR) after the company meets the minimum Net Owned Fund (NOF), fit-and-proper director / shareholder tests, and a satisfactory business plan.

Source citation

Section titled “Source citation”
  • Reserve Bank of India Act, 1934, Section 45-IA.
  • RBI Master Direction – Non-Banking Financial Company – Scale Based Regulation Directions, 2023 (consolidated), rbi.org.in.
  • RBI List of registered NBFCs maintained on rbi.org.in/Scripts/BS_NBFCList.aspx.

Applicability

Section titled “Applicability”

Any company whose principal business is one or more of: financing, lending, investment in shares / debentures / securities / leasing, hire-purchase. The principal business test is: financial assets > 50% of total assets and financial income > 50% of gross income.

NBFC types and NOF

Section titled “NBFC types and NOF”

Categories under Scale-Based Regulation:

CategoryDescriptionNOF (current, ramping by 2027)
NBFC-ICCInvestment and Credit Company — the default category for lenders₹10 Cr (phased target)
NBFC-MFIMicrofinance₹10 Cr (or ₹5 Cr in NE states)
NBFC-FactorFactoring₹5 Cr (75% assets / income from factoring)
NBFC-AAAccount Aggregator₹2 Cr
NBFC-P2PPeer-to-peer lending₹2 Cr
NBFC-IDFInfrastructure Debt Fund₹300 Cr
NBFC-IFCInfrastructure Finance Company₹300 Cr
NBFC-HFCHousing Finance Company (NHB-supervised pre-2019, now RBI)₹20 Cr

For an SME WC business, the relevant category is NBFC-ICC.

Net Owned Fund (NOF) calculation

Section titled “Net Owned Fund (NOF) calculation”

NOF = Owned Fund (paid-up equity + free reserves + securities premium − accumulated balance of losses − deferred revenue expenditure − intangible assets) minus investments in shares of subsidiaries / group companies / other NBFCs / debentures of such companies, to the extent such items exceed 10% of Owned Fund.

In short: equity + reserves minus group exposures above the threshold.

Fit and proper

Section titled “Fit and proper”

All directors and proprietary shareholders (holding above defined thresholds) must satisfy fit-and-proper criteria — no convictions, no insolvency proceedings, no defaults to financial institutions, satisfactory bureau record. Directors must furnish declarations annually and on any change in circumstance.

Application process

Section titled “Application process”

Filed online via the COSMOS portal (cosmos.rbi.org.in) for NBFC applications. Required documents:

  • Memorandum and Articles of Association
  • Audited financials of all directors and promoters for last 3 years
  • Banker’s report
  • Business plan and projections (typically 5-year)
  • Directors’ bio-data and fit-and-proper declarations
  • CIBIL reports of directors and shareholders above threshold
  • KYC of directors, promoters, ultimate beneficial owners

Typical timeline: 6 – 24 months from filing to receipt of CoR, with multiple rounds of queries.

Product implications

Section titled “Product implications”
  • The company cannot offer lending products to the public until CoR is issued. Pre-licence, the only options are:
    • LSP role for a licensed RE (no own-balance-sheet lending).
    • Building the platform while licence is in process.

System implications

Section titled “System implications”
  • Entity-master configuration — capture and store the CoR number, date of issue, RBI region, NBFC category, NOF as last reported. Display on every borrower-facing document.
  • Director master — fit-and-proper declarations, annual refresh workflow.
  • CRAR / NOF monitoring — periodic computation of NOF against the regulatory floor; alert if approach within 10% of floor.

Documents that must be generated

Section titled “Documents that must be generated”
  • Annual return to RBI (DNBS-PPD and other DNBS returns — see Compliance calendar).
  • Quarterly returns (DNBS-01, DNBS-02, DNBS-03, etc. depending on category).
  • Statutory auditor’s certificate on adherence to NBFC norms.

Workflow that must exist

Section titled “Workflow that must exist”
  • New director onboarding with fit-and-proper check.
  • Annual director declaration refresh.
  • Any change in directors / shareholders triggers intimation to RBI within prescribed period.

Reports that must be produced

Section titled “Reports that must be produced”
  • NOF computation monthly internal, quarterly to RBI.
  • Director fit-and-proper status annually.
  • CoR record kept evidenced.

Audit evidence required

Section titled “Audit evidence required”
  • CoR original document.
  • Board resolutions for CoR and major changes.
  • Director declarations.
  • Statutory auditor’s annual report including NBFC-specific certifications.

Sources

Section titled “Sources”
  • RBI Act, 1934, Section 45-IA, available at rbi.org.in.
  • RBI Master Direction — Scale Based Regulation Directions, 2023 (consolidated), available at rbi.org.in.
  • RBI List of registered NBFCs: rbi.org.in/Scripts/BS_NBFCList.aspx.
  • COSMOS portal: cosmos.rbi.org.in.