#NBFC stands for Non-Banking Financial Company which is a #company #registered under the Companies Act 2013, engaged in the business of providing loans & advances, acquisition of shares/stocks/bonds/debentures/securities issued from the government or the local authority or other marketable securities of similar nature, leasing, hire-purchase, insurance business, and chit business. NBFCs, offer financial services but require approval from the RBI before they can operate. They have become one of the fastest-growing businesses in India.
But what exactly is NBFC registration?
NBFC registration is getting your company registered under the Companies Act 2013 and obtaining approval from the Reserve Bank of India. This ensures that you comply with the necessary regulations and can provide financial services to the public.
The market size of NBFCs in India has been expanding rapidly. NBFCs have stepped in to meet the growing loan demand in areas with limited traditional banking facilities. They offer customised loan products, customer-friendly policies, faster processing, and advanced technology making them an attractive alternative to conventional banking.
NBFCs have become a popular choice for individuals, businesses, and MSMEs in India to secure funds as an alternative to traditional banks. These financial entities play a crucial role in the country's vast financial industry. Under the RBI Act and the Companies Act of 2013, NBFCs are defined and regulated by the RBI. They offer a wide range of services like banks, including loans, deposits, leasing, and more.
Due to the limited presence of banks in certain areas and the growing demand for loans, NBFCs have provided increased opportunities for people to start profitable businesses in India.
what are its requisites?
Starting an NBFC requires meeting specific requirements.
• The foremost requirement for the registration is a capital of 2 crores, which represents the total funds contributed by shareholders. Net owned funds, as defined by the RBI, comprise paid-up equity share capital and free reserves, with certain deductions for items like accumulated losses and deferred revenue expenditure. The minimum capital should be kept as fixed deposits with a nationalized scheduled bank.
• Additionally, the directors and shareholders of an NBFC are expected to have financial literacy and the ability to carry out banking operations. The capital contributed by shareholders should be of good quality, without any integrity issues or criminal matters involving related parties.
• Developing a comprehensive business plan is essential for NBFC applicants. This plan should outline various aspects, such as loan processes, capital structure, and market research. It is a critical factor in obtaining an NBFC license, and professionals can assist in creating a robust business plan based on the applicant's inputs.
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