NBFCs perform bank-like functions in India such as providing loans, investment in stocks, shares, bonds, leasing, debentures, etc. without meeting the legal criterion of a financial institution or banks. The process of NBFC Registration is regulated by the Reserve Bank of India (RBI) under the Chapter III-B of the Reserve Bank of India Act, 1934. It is compulsory for NBFCs to obtain commercial or graduation enterprise certificate from the Reserve Bank of India as prescribed under section 45I(A) of the Reserve Bank of India Act,1934.
NBFC Registration Fees
Approximately INR 3,50,000 as a government fee is needed to register a company as Non-Banking Financial Company with Net Owned Fund (NOF) of INR 2 crores. In addition, you have to pay professional fees to NBFC consultant, in case you want to secure the expert’s advice and help.
Therefore, the total capital required to pay for a Non-Banking Financial Company could be INR 15-16 lakhs or above.
Reasons why NBFC Registration Fees is high
It is one of the most frequently asked questions that people ask regarding NBFC and it is quite perceptible. The registration fee is not just the fees required for registering an NBFC, but it consists of everything from annual compliance of NBFC to company incorporation. There are numerous things that must be done while enrolling business for NBFC. As a result, the fee for NBFC is extremely high.
Below-mentioned are reasons why the fee of NBFC license is so high. They are as follows:
Company Incorporation with MCA
Incorporation of a Company in itself is a burdensome task. Along with the fee of application, you need to pay the fee for the following as well:
Ministry of Corporate Affairs fee for filing the application;
Reserve Unique Name application;
SPICe filing;
Every directors Director Identification Number;
Every directors Digital Signature Certificate;
Memorandum of Association and Articles of Association.
Net Owned Fund (NOF)
Even though Net Owned Funds doesn’t count in the fees of NBFC registration, one can regard it NOF as a part of registration. It is so because NOF is the very first eligibility criterion for registering an NBFC. Moreover, it’s the first capital required which makes the registration of an NBFC show so expensive. Though, ensure that you don’t include the Net Owned Fund in the fee of registration.
Requirement of Technical Equipment
In commencing such a big corporation, you will certainly require a few important software. Indeed, it’s one of the binding requirements for obtaining NBFC registration in India. Each company incorporating as a Non-Banking Financial Company must be technically equipped and have all the essential NBFC software. If you lack the technical equipment for the NBFC then the Reserve Bank of India can reject your registration application. Thus, for obtaining NBFC license, you should encompass the approved software which will again cost you in lakhs.
Business Plan
A business plan is another essential aspect contributing to high fees for registering an NBFC. Without a business plan, no organization can even start its work. It’s the layout or the road map of any business. It consists of the objective of the business, executive summary, business model, revenue projection, and much more. Besides, it consists of the next five-year plan for the company. Thus, a business plan is NBFC’s one of the essential requirements.
Now, because there is so much required and includes the most critical parts of the business, experts charge a hefty fee for the same. As a result, the fee for obtaining NBFC license is extremely high.
Government NBFC registration fees
As discussed, the government fee for registering an NBFC is INR 3, 50, 000 which is undeniably high. Plus, because it’s the government fees, negotiation option is not available. Consequently, you have to pay the full amount of fee. It’s one of the major reasons why the registration fees NBFCs is so high.
Documents Required for NBFC Registration
Most of the NBFC’s registration application is rejected because of inappropriate or improper and partial documentation. Documentation plays an essential role in both the NBFC registration process as well as contributing a good hike in the registration fee. Documents required for NBFC are as follows:
Company Incorporation Certificate
Brochure of the NBFC, along with detailed information about the management of the company.
A certified copy of PAN Card or Corporate Identity Number (CIN) of the Company.
Address proof of the registered office address of the company.
A certified copy of Memorandum of Association (MoA).
A certified copy of the Articles of Association (AoA).
A list of all the directors and shareholders of the company, along with their duly signed profile.
Credit Reports/CIBIL of the company’s directors and shareholders must be provided at the time of the NBFC registration process.
A certified copy of board resolution which states that the company has not carried out any NBFC activity until the Reserve Bank of India grants the NBFC registration certificate.
A certified copy of board resolution stating the fair practice code of the company.
Highest Educational Certificates of the proposed directors of the company.
Statutory Auditor's duly signed certificate states that the NBFC does not hold any public deposits nor accepts any public deposit.
Bank Statement and Income tax return self-certified copy is required.
Details about the bank account, loans, balances, credits, etc. must be submitted.
Profit & Loss account statement and Audited Balance sheet along with auditors and directors report of the last three years of the company.
Detailed information about the company's plan for the next three years, along with the projected cash flow statement, balance sheets, and income statements.
IT policy of the Non-Banking Finance Company.
Expert’s fee
An expert fee is what professionals’ demands for helping in the above-mentioned processes. The experienced expert will help you with the process of documentation, offer you a well intact and strong business plan, get your company registered as an NBFC, provide you MOA and AOA, etc. Moreover, the expert will also provide you with advice on how to carry your business after the registration is completed. Additionally, they will be in touch with RBI and explain to you all the necessary information for running your NBFC successfully. All this is costly. Therefore, the expert’s fee is around INR 5 lakhs to INR 10 lakhs, excluding the government fees. If everything is correct and RBI’s eligibility criteria are satisfied, then the expert will get you the registration certificate of your NBFC within 84 to 90 working days.
Conclusion
The process of NBFC Registration is regulated by the Reserve Bank of India (RBI) under the Chapter III-B of the Reserve Bank of India Act, 1934. The Government fee for registering an NBFC is INR 3, 50,000 and the required Net Owned Fund (NOF) is INR 2 crores. In addition, you have to pay professional fees to NBFC consultant, in case you want to secure an expert’s advice and help. Most the reason because of which the registration fees of NBFCs are high are covered in this article, for any queries contact our experts at Corpbiz.