NBFC in India — Complete Overview of Non-Banking Financial Companies

Q: What is the minimum net owned fund (NOF) required for NBFC registration?

₹10 crore for most NBFC categories. Specialised categories like P2P and MFI may have different requirements. NOF is paid-up equity plus free reserves less accumulated losses and intangible assets.

Q: Can a private limited company register as an NBFC?

Yes, if it meets the minimum NOF, has a director with financial sector experience, and its principal business is financial activity.

Q: What is the principal business test for an NBFC?

Financial assets must exceed 50% of total assets AND income from financial assets must exceed 50% of gross income. Both conditions must be met simultaneously.

Q: What is the RBI's Scale-Based Regulation (SBR) framework for NBFCs?

SBR classifies NBFCs into Base Layer, Middle Layer, Upper Layer, and Top Layer with progressively stringent capital, governance, and disclosure requirements based on size and systemic risk.

Q: What happens if a company operates as an NBFC without RBI registration?

It is a criminal offence under Section 45-IA of the RBI Act. Penalties include imprisonment up to 5 years and fines. The RBI can stop operations and attach assets.

A comprehensive guide to Non-Banking Financial Companies (NBFCs) in India — their types, regulatory framework, RBI registration requirements, and compliance obligations under the Companies Act and RBI Act.

What is an NBFC?

A Non-Banking Financial Company is a company registered under the Companies Act that engages in the business of loans, advances, acquisition of shares, leasing, hire purchase, insurance, or chit business — but does not hold a banking licence.

RBI Registration Requirement

Every NBFC with assets of ₹10 crore or more must register with the Reserve Bank of India before commencing financial business. The RBI is the primary regulator for most NBFC categories under the RBI Act, 1934.

Types of NBFCs

NBFCs are classified into NBFC-ICC (Investment and Credit Companies), NBFC-MFI (Microfinance), NBFC-P2P (Peer-to-Peer Lending), HFC (Housing Finance), CIC (Core Investment Company), and NBFC-AA (Account Aggregator), among others.

Deposit vs Non-Deposit NBFCs

NBFCs accepting public deposits are subject to stricter RBI regulations including credit ratings, liquid asset requirements, and deposit insurance. Most NBFCs are non-deposit-taking entities operating on borrowed funds and equity capital.

NBFC Regulatory Framework in India

NBFCs in India are primarily regulated by the Reserve Bank of India under the RBI Act, 1934, and the directions issued thereunder. However, certain categories fall under the jurisdiction of other regulators — the National Housing Bank (NHB) regulates Housing Finance Companies, while SEBI regulates NBFCs engaged in capital market activities. NBFCs engaged in insurance activities are regulated by IRDAI.

The RBI's scale-based regulatory (SBR) framework, introduced in 2021, classifies NBFCs into four layers — Base Layer, Middle Layer, Upper Layer, and Top Layer — with progressively stringent compliance obligations based on size, complexity, and interconnectedness.

Key Differences Between NBFCs and Banks

NBFCs cannot accept demand deposits repayable on demand (no savings/current accounts)
NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on themselves
Deposit Insurance and Credit Guarantee Corporation (DICGC) protection is not available to NBFC depositors
NBFCs are not subject to CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio) requirements applicable to banks
NBFCs can be incorporated as companies, while banks require a banking licence under the Banking Regulation Act

Our NBFC Advisory Services

We provide end-to-end advisory across the NBFC lifecycle — from NBFC registration and NBFC takeover through annual compliance, legal support, and registration cancellation. We also advise on specialised NBFC categories including Microfinance Companies, Housing Finance Companies, P2P Lending Licences, and Account Aggregators.

Frequently Asked Questions

What is the minimum net owned fund (NOF) required for NBFC registration? +

The minimum Net Owned Fund (NOF) required for NBFC registration with the RBI is ₹10 crore for most NBFC categories. For specialised categories such as NBFC-P2P, NBFC-AA, and NBFC-MFI, the RBI may prescribe different NOF requirements. NOF is broadly defined as paid-up equity capital plus free reserves less accumulated losses and intangible assets.

Can a private limited company register as an NBFC? +

Yes. A private limited company incorporated under the Companies Act, 2013 can apply for NBFC registration with the RBI, provided it meets the minimum NOF requirement, has at least one director with relevant financial sector experience, and meets the other RBI eligibility criteria. The company's principal business must be financial activity to qualify as an NBFC.

What is the principal business test for an NBFC? +

Under the RBI's principal business criteria, a company is classified as an NBFC if its financial assets constitute more than 50% of its total assets AND income from financial assets constitutes more than 50% of its gross income. Both conditions must be satisfied simultaneously. This is the threshold test used by the RBI to determine whether RBI registration is mandatory.

What is the RBI's Scale-Based Regulation (SBR) framework for NBFCs? +

The RBI's Scale-Based Regulatory framework classifies NBFCs into four layers: Base Layer (smaller NBFCs with asset size below ₹1,000 crore); Middle Layer (deposit-taking NBFCs and larger non-deposit NBFCs); Upper Layer (top 10 NBFCs identified by the RBI plus systemically important ones); and Top Layer (reserved for NBFCs posing extreme systemic risk, currently empty). Each layer carries progressively stringent capital, governance, and disclosure requirements.

What happens if a company operates as an NBFC without RBI registration? +

Operating as an NBFC without RBI registration is a criminal offence under Section 45-IA of the RBI Act, 1934. The RBI can issue directions to stop operations, attach assets, and initiate prosecution against the company and its directors. Penalties include imprisonment of up to 5 years and fines. The RBI regularly publishes lists of unauthorised entities and takes coercive action against non-compliant operators.

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Complete NBFC advisory — registration, compliance, takeover, and specialised category licensing across India.

F.A.Q.

What is GSTR-9 and why is it required?

GSTR-9 is an annual GST return that summarizes all transactions reported during the financial year. It is required to ensure proper reconciliation and compliance with GST laws.

Who is required to file GSTR-9?

All regular GST-registered taxpayers are required to file GSTR-9, except composition dealers, casual taxable persons, and non-resident taxpayers.

What is the due date for filing GSTR-9?

The due date is generally 31st December following the end of the relevant financial year, unless extended by the government.

What details are included in GSTR-9?

It includes details of outward supplies, inward supplies, input tax credit claimed, taxes paid, and adjustments made during the year.

Is GSTR-9 mandatory for all taxpayers?

GSTR-9 is mandatory for most regular taxpayers, but certain small taxpayers may get exemptions based on turnover thresholds notified by the government.

What happens if GSTR-9 is not filed on time?

Late filing may result in penalties and late fees, along with potential compliance issues or notices from GST authorities.