NBFC Registration Online in India

Setting up an NBFC in India offers a promising opportunity for entrepreneurs aiming to enter the financial services sector without obtaining a full banking license. These companies cater to diverse customer segments by offering personal loans, gold loans, vehicle financing, micro-lending, and more

NBFCs play a vital role in financial inclusion by reaching unbanked and underserved regions where traditional banks may not operate efficiently.

As the demand for alternative financing grows, especially among small businesses and rural borrowers, NBFCs have become a preferred lending channel. However, to operate legally, an NBFC must first be registered and regulated by the RBI.

What exactly is an NBFC in India?

A Non-Banking Financial Company (NBFC) is a company (registered under the Companies Act) that provides banking-like services, including

• Loans and advances
• Credit facilities
• Asset Financing
• Investment Management
• Hire-Purchase
• Leasing

By law, an NBFC’s principal business must be financial, for example, lending money or investing in securities, rather than activities like agriculture, industrial production, trading goods or services, or real estate construction.

In other words, it should earn most of its income from financial activities (the 50-50 test) to qualify as an NBFC. The Reserve Bank of India (RBI) regulates NBFCs, and no company can operate as an NBFC without RBI approval.

NBFC vs. Bank

NBFCs and banks both provide loans and financial services, but there are key differences:

• Demand Deposits: NBFCs cannot accept demand deposits (like savings or current account deposits) from the public. Banks are allowed to take deposits repayable on demand.
• Payment System: The payment and settlement system does not include NBFCs. They cannot issue cheques on themselves or participate in clearing houses. Banks, by contrast, can issue cheques and offer full payment services.
• Deposit Insurance: Money deposited with deposit-taking NBFCs is not insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). Bank deposits up to a certain limit are insured by DICGC.
• Regulation: The Banking Regulation Act and more stringent capital and reserve criteria apply to banks. NBFCs are governed by the RBI Act and specific NBFC master directions, but typically have slightly more relaxed norms (e.g., they can borrow more money relative to their capital) compared to banks. Both are regulated by the RBI, but only banks require a banking license and maintain CRR/SLR (cash and statutory reserves).

These differences mean NBFCs can focus on specialized lending or niche finance (often with faster service), while banks offer broader financial services with more safeguards for depositors. NBFCs are also more flexible but come with a higher risk to consumers due to fewer regulatory protections.

The RBI classifies NBFCs according to the type of business they conduct. Major types include:

1. Investment and Credit Company (ICC)

An ICC is a non-deposit-taking NBFC that primarily engages in asset financing, providing loans/advances, or acquiring securities. It does not include specialized NBFCs like housing finance or microfinance. Essentially, ICCs function as general lenders or investors.

2. Infrastructure Finance Company (IFC)

An Infrastructure Finance Company (IFC) is an NBFC that deploys at least 75% of its total assets in infrastructure lending. IFCs must also meet minimum size and capital norms set by the RBI. They channel funds into projects like roads, power, ports, etc., long-term in nature.

3. Micro Finance Institution (MFI)

An NBFC-MFI is a non-deposit-taking NBFC with at least 75% of its assets in microfinance loans. These are collateral-free loans given to households with an annual income of up to ₹3 lakh. MFIs mainly provide small loans to low-income borrowers, especially in rural areas.

The RBI has specific rules for MFIs, such as limits on loan amounts and interest rates, to protect borrowers. Additionally, MFIs must ensure that a household’s repayment obligations do not exceed 50% of its income.

4. NBFC-Factors

An NBFC-Factor is a non-deposit NBFC whose principal business is factoring (invoice discounting). At least 50% of its assets and 50% of its income must come from factoring activities. These NBFCs finance businesses by purchasing their receivables, providing working capital support.

5. Gold Loan NBFCs

These NBFCs specialize in lending against gold jewelry as collateral. While the RBI does not classify them as a separate legal category, they are common. RBI regulates them by setting Loan-To-Value (LTV) limits.

For example, in June 2025, the RBI allowed gold loans up to ₹2.5 lakh with an LTV ratio of 85%, which is higher than the previous limit of 75%. This means that a borrower pledging gold worth ₹1,00,000 can now receive a loan of up to ₹85,000.

Additionally, the RBI has set the LTV ratio as follows:

• 80% for loan amounts between ₹2.5 lakh and ₹5 lakh.
• 75% for loans above ₹5 lakh.

Gold loan NBFCs must adhere to these LTV guidelines and risk management norms. Lenders have until April 1, 2026, to fully implement these changes.

6. Account Aggregators (NBFC-AA)

An NBFC-AA (Account Aggregator) is an NBFC that provides financial information aggregation services under a contract. In practice, Account Aggregators allow customers to consolidate and share their financial data (bank statements, insurance policies, investments) with third parties securely. The data aggregated remains the customer’s property and is shared only with consent.

7. Peer-to-Peer (P2P) Lending Platforms (NBFC-P2P)

An NBFC-P2P is a platform registered as an NBFC that connects lenders and borrowers digitally. It acts purely as an intermediary, facilitating loans between individuals or businesses via an online platform. NBFC-P2Ps do not use their funds; they only screen users and handle transactions.

RBI regulates NBFC-P2Ps under separate rules to ensure transparency and prevent misuse. NBFC-P2Ps must also maintain a cap on exposure:

• ₹50 lakh per lender across platforms
• ₹6 lakh per borrower
• ₹50,000 per lender-borrower pair

Additionally, NBFC-P2Ps cannot guarantee returns or take on credit risk.

Each type of NBFC is governed by specific RBI regulations, which may include credit rating requirements, prudential norms, and maximum loan sizes, tailored to its business model.

To align regulations with risk, the RBI introduced a Scale-Based Regulation (SBR) framework for NBFCs effective October 1, 2022. Under SBR, NBFCs are classified into four layers based on size, activities, and systemic importance. The higher the layer, the stricter the norms. The layers are:

1. Base Layer (NBFC-BL): The base layer (NBFC-BL) is the lowest and is made up of NBFCs that are smaller and have a smaller reach. These NBFCs are generally not systemically important. They follow the minimum regulatory requirements.

Example: NBFC-P2P platforms typically fall under this layer. They are smaller in scale and focus mainly on peer-to-peer lending, posing less systemic risk.

2. Middle Layer (NBFC-ML): NBFC-MLs are larger companies that meet certain thresholds such as asset size, operational complexity, or public funds. These NBFCs are considered systemically important and face enhanced compliance standards, such as stricter disclosures and higher governance standards.

Example: Microfinance institutions (MFIs) typically fall under this category. They have significant outreach in rural areas, serving low-income individuals with microloans.

3. Upper Layer (NBFC-UL): The Upper Layer (NBFC-UL) includes the largest NBFCs with extensive operations or those considered highly systemically important. These companies are subject to the most stringent RBI norms, such as higher capital buffers and advanced risk management practices.

Example: Leading financial companies with substantial national impact, like certain large housing finance or investment firms, would be categorized here.

4. Top Layer (NBFC-TL): The Top Layer (NBFC-TL) is designed for NBFCs that may pose systemic risk. This layer should remain empty unless the RBI finds an NBFC that needs more regulatory restrictions due to its size or potential to impact the economy. If populated, these NBFCs would be subject to tailored supervisory actions.

Example: This layer is usually kept vacant unless an NBFC grows substantially and poses a significant risk to the financial system.

The SBR framework ensures proportional regulation: small NBFCs bear light compliance, while larger ones uphold higher safeguards.

Before applying, ensure you meet the RBI’s eligibility criteria:

1. Legal Structure

The applicant must be a company (Private or Public Limited) incorporated under the Companies Act, 2013 or 1956. Other forms (Partnership, LLP, Sole Proprietorship, etc.) are not eligible. The company’s Memorandum of Association (MoA) should explicitly include NBFC activities (like lending, hire purchase, investment, etc.) in its objects.

2. Net Owned Fund (NOF)

To register as an NBFC, the company must have a minimum Net Owned Fund (NOF) of ₹10 crore. This requirement was revised from ₹2 crore to ₹10 crore by the RBI. NOF means paid-up equity capital plus free reserves minus intangible assets and accumulated losses.

NOF is calculated using the following formula:

(NOF = Paid-Up Equity Capital + Free Reserves − Intangible Assets − Accumulated Losses).

Where:

• Paid-Up Equity Capital refers to the total capital raised by the company.
• Free Reserves are the company's unallocated reserves.
• Intangible Assets include non-physical assets like goodwill.
• Accumulated Losses represent the losses carried forward from previous years.

The INR 10 crore threshold became mandatory for all NBFCs from October 1, 2022, with existing NBFCs given till March 31, 2027, to meet it.

(Special categories have higher NOF: e.g., ₹300 Cr for infrastructure finance companies, ₹20 Cr for housing finance companies, etc., as RBI specifies.) You must deposit or hold this ₹10 Cr in liquid capital (bank or cash/ liquid investments) at the time of application.

3. ‘Fit and Proper’ Criteria

The RBI requires that the promoters, directors, and key management personnel of an NBFC be “fit and proper.” This means they must have a good reputation, adequate experience, and no history of criminal or regulatory violations.

Although the RBI doesn’t set a specific credit score requirement, a clean track record is crucial. To demonstrate this, directors typically provide supporting documents such as:

• Director KYC: Verification of identity and background
• CIBIL Reports: Credit history checks
• Affidavits: Signed declarations confirming no criminal or regulatory violations
• CA-Certified Net Worth Certificates: To affirm the financial standing of the directors

The above documents ensure that the individuals involved are trustworthy and meet the necessary criteria set by the RBI for NBFC registration.

4. Other Considerations

RBI may check the credit rating of the NBFC if applicable, and all existing statutory and regulatory obligations must be clear. Also, avoid dual regulation: firms already regulated by SEBI, IRDAI, etc. (like SEBI-registered asset managers and IRDA-licensed insurers) may be exempt from NBFC registration under certain conditions.

Meeting these prerequisites upfront (company set up, capital parked in the bank, management vetted) is crucial for a smooth application.

When applying, you must submit various corporate, financial, and personal documents. Key documents include:

• Corporate Documents

  • Certificate of Incorporation: The company's Certificate of Incorporation issued by the Ministry of Corporate Affairs (MCA).
  • Memorandum and Articles of Association (MOA/AOA): These should allow NBFC activities (e.g., "to carry on the business of financing, loans and advances, investments, etc.").
  • Board Resolution: From your company’s board approving the commencement of NBFC business. This resolution should authorize the directors to apply for the NBFC license and approve depositing the NOF..

• Documents for Directors and Shareholders

  • KYC Documents: Self-attested PAN card, Aadhaar, passport, driver’s license, or voter ID, along with a photograph and signature, for each director and major shareholder.
  • Proof of Residence: Utility bill, bank statement, etc., for directors.
  • Professional/Resume Details of Directors: To prove experience.
  • Certificates from CA: Certifying the net worth of directors/promoters (some applications require net worth statements).
  • Fit & Proper Declarations: Signed by directors attesting they meet RBI’s criteria (some advisors provide templates for this).

• Financial Documents

  • Net Owned Fund Certificate: A Chartered Accountant’s certificate confirming the company’s NOF is at least ₹10 crore as of the latest date.
  • Audited Financial Statements: Balance sheet and P&L for the past 2–3 years (or latest accounts for new companies), showing NOF sources and business funds.
  • Bank Statements/Banker’s Report: Statements or a report from the company’s banker showing the ₹10 crore deposit (or capital balance) in a single current account.
  • Income Tax Returns (ITR): ITR of the company (and sometimes of directors) for the last few years, to show financial track record.

• Board Resolutions and Declarations

  • Board Resolution on NBFC: A resolution specifically approving the commencement of NBFC business.
  • Board Resolution for NOF: A separate resolution confirming the deposit of NOF.
  • Declaration of Compliance: Signed by a director, stating that the company fulfills RBI conditions and is eligible to operate as an NBFC.
  • Undertaking Letter: Declaring that all the documents are true and that no RBI directions have been violated.

• Miscellaneous Documents

  • Business Plan: A brief business plan (3–5 year projection) is uploaded online (see Step 3). A copy should accompany the application.
  • Customer Complaints Grievance Redressal Policy: A draft policy showing how the NBFC will handle customer disputes (required by RBI).
  • Board-approved Fair Practices Code: As mandated by the RBI, a code governing lending practices
  • Passport-size Photographs of All Directors: As specified by the RBI.

An indicative checklist of documents is available on the RBI’s website, but the above covers the essentials. In practice, legal and CA advisors compile these into a physical form. Incomplete or inconsistent documentation is the most common reason for RBI queries or delays.

Registering an NBFC with the RBI involves several steps. In summary:

Step 1: Incorporate Your Company

Set up a Private Limited or Public Limited Company under the Companies Act, 2013. Ensure the company’s Memorandum of Association includes NBFC-related objects (e.g., “to provide loans and advances, to act as financial consultants, etc.”). The company should have already obtained a valid PAN and be compliant with other corporate formalities.

Step 2: Arrange the Minimum NOF

Deposit a minimum of ₹10 crore in the company’s bank account. Obtain a Net Owned Fund certificate from a Chartered Accountant certifying this balance. This capital must be free (unpledged, liquid) and shown in audited financial statements or bank statements.

Step 3: Prepare a Business Plan

Draft a detailed 5-year business plan outlining your proposed NBFC activities (types of loans/products, target markets, geographic reach) and financial projections. RBI scrutinizes this plan closely, so include market research, risk management policies, projected profit & loss, and capital planning.

Step 4: Apply Online via the RBI’s Portal

From May 1, 2025, NBFC registration must be done through the PRAVAAH portal, which has replaced the earlier COSMOS portal.

Visit the official PRAVAAH portal on the RBI website (pravaah.rbi.org.in) and register your company. Fill out the NBFC application form and upload all required documents. After submission, you will receive an application reference number.

The PRAVAAH portal is the RBI’s official platform for all NBFC registration-related filings.

Step 5: Submit Physical Documents

After online submission, send the hard copy of the application form along with all supporting documents to RBI’s Central Office (CGM, Dept of Regulation, RBI, Mumbai) by post or courier. This must include signed declarations, board resolutions, notarized affidavits, etc., as per RBI guidelines. Track and confirm delivery of this envelope.

Step 6: RBI Scrutiny and Certificate of Registration

RBI will review your application and documents. If needed, they may seek clarification or additional documents. Upon satisfactory scrutiny, the RBI will issue a Certificate of Registration (CoR) to the company. This CoR is the official NBFC license. Only after receiving the CoR can the company legally commence NBFC operations.

Each of these steps must be done carefully. It is common to engage a professional advisor to prepare the forms and documents. Several specialist agencies provide end-to-end NBFC registration support.

The NBFC registration timeline varies, but it typically takes 3–6 months from start to finish. For example, preparing documents can take 1–2 months, and the RBI’s review can take another 3–4 months. Key factors affecting timing are document readiness and the RBI’s workload.

To minimize delays, ensure all documents (especially NOF certificates and KYC) are in order before filing. Even after submission, be responsive if the RBI asks for clarification. Note that the RBI does not have a strict deadline to decide, but most applications are processed within six months if complete. In practice, applicants often budget half a year for the entire registration process.

Registering an NBFC involves various fees and costs:

• Government Fees and RBI Charges

  • Company Incorporation Fees: The fee (and stamp duty) paid to the Ministry of Corporate Affairs for company registration (approx. ₹10,000–₹20,000 depending on authorised capital and professional service).
  • RBI Application Fee: A non-refundable fee of ₹300,000 (₹3 lakh) is required when submitting the NBFC registration application via the Pravaah portal.
  • Other Statutory Fees: There may be minimal fees (hundreds of rupees) for notarized declarations, stamp paper affidavits, etc., required by the RBI.

• Consultant or Service Fees

Many applicants hire NBFC registration consultants or law firms to prepare and file the application. Their professional fees vary widely: typically ₹50,000 - ₹150,000, depending on the firm’s reputation and scope of work. These fees cover drafting documents, liaising with the RBI, and follow-ups.

• Other Potential Expenses

  • Office Setup: RBI expects NBFCs (especially deposit-taking and systemically important ones) to have a properly registered office. Rent/office setup costs can be significant if you don’t already have space.
  • Audit Fees: Budget for auditing costs (to issue the NOF certificate and future mandatory audits).
  • Compliance Systems: NBFCs often invest in basic compliance software (for KYC, accounting, etc.) before launch.
  • Marketing/Branding: A logo, website, brochures, etc., if you’re starting a financial firm.

In summary, besides the mandatory NOF capital, government/regulatory fees are modest (mostly a few thousand), while professional and setup costs can range from tens of thousands to a few lakhs. Planning a ₹1–3 lakh budget for NBFC license application (excluding the ₹10 Cr capital itself) is realistic.

Registered NBFCs must file regular returns to the RBI, which are used to monitor the company's financial health, risk exposure, and compliance with regulations. Key returns include:

Periodic Filings with the Reserve Bank of India

Registered NBFCs must file regular returns and reports to the RBI. These include:

Prudential Norms Returns (NBS)

• NBS-7: Quarterly return for ND-SI NBFCs (non-deposit, systemically important). Includes capital funds, risk-weighted assets, CRAR, and more.
• NBS-2: Monthly return for deposit-taking NBFCs on prudential norms.
• NBS-3: Quarterly return for deposit-taking NBFCs on liquid assets.
• NBS-4: Annual return for defaulting deposit-taking NBFCs on critical parameters.
• NBS-9: Return on asset quality, provision, and other financial details (usually quarterly).

Timely filing of these returns is mandatory.

• Asset-Liability Management (ALM) Returns: NBFCs with a large size must file statements on liquidity mismatches (monthly/half-yearly) as prescribed by the RBI.
• Statutory Auditor Certificate (SAC): Every year (at March-end), the statutory auditors must certify to the RBI that the NBFC is engaged in NBFC business and report the asset/income pattern. This confirms continued eligibility.
• Annual Financial Statements: Audited balance sheet and profit/loss account of the NBFC are to be reported (some forms like NBS-9, depending on deposits).
• Any other returns: RBI may mandate additional returns (e.g., NBS-10, SAC, or industry-specific formats) from time to time. Always refer to the latest RBI master directions for current forms.

Failure to file returns on time can attract penalties and even license cancellation. So, set up a compliance calendar immediately and designate a compliance officer.

Registrations with Other Bodies

NBFCs must also register with certain outside agencies:

1. Credit Information Companies (CICs): An NBFC must become a member of all recognized credit bureaus (like CIBIL, Equifax, Experian, CRIF High Mark). It is required to report all loans (disbursed and outstanding) to these CICs monthly. This ensures borrowers’ credit histories are updated.
2. Central KYC Registry (CERSAI): NBFCs should register as KYC User Agencies (KUA) with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) under the CKYC (Central KYC) framework. This allows NBFCs to use the centralized KYC records database.
3. Financial Intelligence Unit – India (FIU-IND): NBFCs are “reporting entities” under anti-money-laundering laws. They must register with FIU-IND and file monthly Currency Transaction Reports (CTR) for large cash transactions and Suspicious Transaction Reports (STR) if any suspicious activity is noticed. This is to prevent money laundering and terror financing. (RBI mandates an annual AML/CFT training and compliance certificate, too.)

Annual Compliance with the Ministry of Corporate Affairs (MCA)

In addition to RBI filings, NBFCs must meet company law obligations:

1. Annual Return (MGT-7): File annual return with MCA within 60 days of the AGM, covering shareholding, directors, etc.
2. Financial Statement (AOC-4): File audited financial statements (balance sheet, P&L, cash flow, notes) with MCA within 30 days of AGM.
3. Board Meeting and AGM: Convene Board meetings and AGM on time each year, and maintain minutes.
4. Statutory Audit: Appoint auditors, get books and NOF certificate audited annually.
5. Other Disclosures: Ensure any changes in directors, capital, registered office, or business object are updated with the ROC.