Growing Your Fintech Startup Through NBFC Licence

Introduction

Fintech startups are those innovative businesses which seek to revolutionise the usage of money in today’s digital world by providing digital solutions, software, platforms etc. Whether you’re involved in a fintech startup or an existing enterprise, understanding the process of NBFC registration online is crucial for regulatory compliance. Recently too many fintech startups have been born in India and many of them have even become unicorns such as Paytm, Cred, PhonePay, Razorpay, BharatPay, OneCard etc.

NBFC stands for Non-Banking Financial Corporation, which are financial institutions which seek to provide ancillary banking services. They are not an alternative to conventional banking systems but instead support them. The major difference between NBFC and Banks is as follows:

1. Banks offer wide-ranging banking services whereas NBFCs majorly engage in lending and investment activities.
2. Banks can accept public deposits but NBFCs can not. Moreover, they can not even accept cheques.
3. Banks require a banking licence from RBI whereas NBFCs require a NBFC licence, usually obtained through an online registration process. However, both are regulated by RBI.
4. Banks are regulated by the Banking Regulation Act, of 1949 whereas an NBFC is incorporated as a company under the Companies Act, of 1956 /2013.

From the above discussion, it becomes evident that fintech startups and NBFCs have nothing in common except the fact that they both provide financial services. Recently the co-founder of BharatPay in his interview with the Economic Times said “It is fundamentally clear that there is no money in payments. The core business model is lending.

Recent Trends

Recently many fintech companies have acquired NBFC licences which enable them to offer lending services by themselves without partnering with other financial institutions. Therefore it makes them self-dependent and they keep all the earned profit themselves instead of just taking commissions as they used to previously. Neobank Fi is the most recent fintech company to acquire NBFC from RBI. Before that Jupiter, Groww, Cred and many more had acquired NBFC licences.

What is an NBFC Banking Licence?

An NBFC licence is given to a company incorporated under the Companies Act 2013 or the previous act. Which is involved in financial business and offers services similar to Banks but does not hold a banking licence. NBFCs are governed as per Chapter III B of the RBI Act, 1934. It can be classified into various types but majorly they are of two types – deposit taking and non-deposit taking. Obtaining an NBFC licence through online registration simply means obtaining a CoR (Certificate of Registration) from RBI.

What Does It Bring To The Table?

It enables it to offer loans and other similar services without any legal restrictions. All the fintech startups which have acquired this licence expand their business in the field of lending services.

What Do Customers Get?

1. Lending Services: The first and foremost benefit will be that now the customers can avail of the lending services offered by them.

2. Improved Services & Terms of Loan: The licence will make them self-sufficient and independent from third parties, enabling them to serve customers better and allowing for relaxed loan terms.

3. Faster Approvals: We all know about the comprehensive and difficult loan approval process. However, fintech companies have better technology to access creditworthiness and can make fast approvals, which will enable quick credit facilities.

4. Integrated Services: As the fintech startup would be offering several financial services before acquiring an NBFC licence, it can offer integrated services in one place as well after acquiring the licence, which will result in increased efficiency for customers.

Conclusion

NBFC registration online is a crucial step for those looking to establish a financial institution in India. While the process may seem complex, the benefits of being a registered NBFC — such as credibility, access to wider markets, and regulatory support — are significant. By understanding the prerequisites, documentation, and registration process, entrepreneurs can navigate the NBFC registration journey more effectively.