Non-Banking Finance Company – Semantic Taxgen Pvt Ltd

Non-Banking Finance Company

Register A Non-Banking Financial Company

Step 1

We help you reserve your name with MCA.

Step 2

We help you get 1 DSC and 3 DINs.

Step 3

We draft and file the documents required for your company registration (MoA and AoA).

About Non-Banking Financial Company

Getting a license for finance company registration in India is one of the most difficult tasks. This is because with finance word added with your company name, every person will see you suspiciously as in you are doing some fraud or fooling people with unwanted schemes. Further even the government looks at you suspiciously and hence does not grant the finance license so easily.

To know why people look at the finance business suspiciously, one needs to go through the history of finance companies in the 90’s when everyone was doing the finance business and fooling people around and doing fraud of crore of rupees.

Following are the various types of Finance company registration:

With this entire brief introduction, let us understand how one can start a finance company in India and what the best possible options one can avail.

A company whose business is borrowing and lending money among its members is called a Nidhi Company. It is based on the “Principle of Mutuality” and is regulated by the Ministry of Corporate Affairs (MCA).

Registration Procedure

  1. The first step is to get 10 Individuals together who are desirous of forming a society.
  2. A Provisional committee should be formed and a chief promoter should be elected from amongst them.
  3. Name of the society has to be selected.
  4. An application to be made to the Registration Authority for reservation of name and letter to that effect has to be obtained confirming the reservation of name. The name once registered is valid for three months.
  5. The entrance fees and share capital has to be collected from the prospective members
  6. A bank account has to be opened in the name of proposed society as per the directions of the registration authority. The entrance fees and share money has to be deposited in the bank account and the certificate from the bank has to be obtained in that respect.
  7. The registration fees of Rs 2 500 has to be deposited with the Reserve Bank of India and receipted 1 challan there of is to be obtained.

In India, to register an NBFC’s are governed by the Reserve Bank of India (RBI) and require a minimum capital of Rs.2 crore (5 crores in case of micro finance) to start with. Further getting the RBI license is a huge task and takes almost 5 to 6 months to gets the complete procedure done. Also, there is no guarantee that RBI will grant you the finance license.

Let us discuss advantages and disadvantages of NBFC registration:

Advantages of NBFC registration

  • Most authentic finance company option
  • Proper licensing through Reserve Bank of India
  • Can work anywhere in India
  • Can accept foreign investment up to certain limit.

Disadvantages of NBFC registration

  • Capital requirement too high
  • It is not easy to get the RBI license
  • Very High compliance cost

It is one of the best and the easiest option to start your finance business in India. Nidhi Company can be started with 5 lakh capital and can be registered in 15 to 20 days. Under this option, one can accept deposit and grant loan.

Let us understand the basic requirements of Nidhi company registration:

  • Minimum capital of Rs.5 lakh: A Nidhi companies can be started with a minimum capital of Rs.5 lakh and in a span of a year, the same needs to be raised to 10 lakh.
  • A minimum person required: To start a Nidhi Company in India, a minimum of 7 persons are required out of which 3 people are elected as a director of the company.
  • Documents required for registration: The documents required for Nidhi Company registration are as follows:

 

For directors and shareholders:

  • PAN Card
  • Photo
  • Identity proof (Aadhar card, Voter ID card)
  • Address proof (Mobile bill/ Bank statement)

For Registered office

  • Electricity bill
  • NOC
  • Rent agreement (in case premises are registered).

Chit Fund Company is another type of finance company in India which does not require Reserve bank of India (RBI)’s approval. Chit Fund Companies are governed by Chit Fund Act 1982 and RBI has specifically exempted from its core provisions. Chit Fund Companies are widely famous with their name known as ‘committee’.

Basic terms to understand Chit Funds

To understand how the Chit Fund companies work, we must understand few terms which will be used during the process.

  • Foremen: Foremen are the person who manages all the chit fund activities and against which he charges a monthly commission which is around 5% of the total chit value.
  • Members: Members are the person who contributes to the Chit on a monthly basis a fixed sum.
  • Bid Amount: Bid amount is sum of money which is proposed by the members to be forgone. The highest bid is selected and pool is disbursed to the member.
  • Dividend: Dividend is the sum forgone by the members to collect the bid amount offered less the commission charged by the foremen.

Documents required for Chit Fund Company registration

Initially, the following documents shall be required for Chit fund company registration:

For every director and member

  • PAN card
  • ID proof
  • Bank statement/Electricity bill/Mobile bill/telephone bill – Anyone.
  • Other documents as per Chit registrar.

For registered address

  • Ownership document or rent agreement
  • Electricity bill
  • Copy of NOC

Let us understand how the chit fund companies or the committee works and will then proceed to how the company is registered in terms of Chit Fund Act, 1982.

A Micro finance Company which is also commonly known as Micro credit organization deals in small loan which is less than Rs.50,000 to various household, small businesses who do not have access to formal banking channels or eligibility for loans.

How to register micro finance Company in India?

There are two option by which micro finance can be registered in India one is through NBFC and another through Section 8 company. NBFC require 5 crore capital but section 8 does not require any minimum capital. Here is the process:

# Prepare DSC and file Name Approval: The first step is to prepare DSC and DIN. This takes sometime one to two days. Thereafter, you need to file for name approval. The name should be unique and should end with words like foundation, sanstha etc.

# File for License: After getting name approved, the next step is to prepare all the documents and then apply for license to do Micro finance business in consonance with prescribed RBI guidelines.

# File for Incorporation: After getting the license, we need to file for incorporation and once company is incorporated, you can start the micro finance business in India. However, please remember that you cannot take any deposit under section 8.

Documents Required for Micro Finance Company Registration

  • For Directors/Shareholders
  • Copy of PAN Card
  • Aadhar Card
  • Address Proof (Bank Statement, Mobile Bill, Telephone Bill)
  • Passport Size Photo
  • For Registered Office
  • Ownership Proof (Electricity bill etc)
  • Utility Bill (Gas bill, Electricity bill)
  • NOC(Download format)

Registration Process

Here are the following steps that need to be taken for NBFC registration with RBI:

  •  Acquire DSC and Din for directors
  •  File Name approval application
  •  An affidavit from directors to fulfill RBI compliance
  • Draft MOA & AOA File incorporation forms with necessary documents
  • Obtain a certificate of registration from Registrar of Companies
  • Deposit Net Owned Funds in a bank account opened for company
  • Apply for registration with RBI under RBI Act, 1934.
  • Applicant Company has to file an online application with the RBI on its official website.
  • After this, an applicant will get a reference number to facilitate inquiry in the future.
  • After this, it is required to submit the duplicate hard copies to the concerned regional office of RBI.
  • The regional office shall check the accuracy of all submitted documents.
  • The regional office will send the application for NBFC LIcense to the central office.
  • The central office of RBI grants NBFC registration only when applicant company fulfills prescribed requirements under section 45-IA.
  • NBFC must commence its business within 6 months from the date of Certificate of Registration.

License Requirements with RBI

  •  The company must be registered as a public limited company or private limited company in India.
  •  The company must have a minimum net owned fund of Rs.2 Crore.

*Provided that, net owned funds should be calculated according to the last audited balance sheet of the company.

  •  For a minimum period of 12 months and a maximum period of 60 months, NBFCs are allowed to accept/renew public deposits.
  •  NBFCs cannot accept deposits repayable on demand.
  •  NBFCs can offer interest rates not higher than the ceiling rate prescribed by RBI from time to time.
  •  Offering gifts/incentives or any other additional benefit to the depositors is not allowed.
    There is a requirement of minimum investment grade credit rating.
  • Repayment of deposits by NBFCs is not guaranteed by RBI.
  • Furnishing hard copies of the list of documents with the regional office of the RBI.

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