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October 26, 2016 at 8:40 am #821
how to formation of NBFC ( non banking finance company ) ,
is there any registration required from RBI,
company will be filed intimation report every year with RBI ?
what is the rate of interest for mortgage loans for long term ?
18% or 12% or any other restrictions are there?
is there any RBI guidelines or
interest act will be applicable ?
October 31, 2016 at 3:48 pm #843
Dr. Ashok DhamijaAdvocate
As per the website of Reserve Bank of India (RBI), a Non-Banking Financial Company (NBFC) is explained as under:
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares / stocks / bonds / debentures / securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).
RBI website states that NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences between NBFCs and Banks as given below:
(1) NBFC cannot accept demand deposits;
(2) NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
(3) deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
In view of the above, it is clear that NBFC has to be registered in much the same way as any other company is registered under the Companies Act, subject to the conditions mentioned above.
On the issue whether it is necessary that every NBFC should be registered with RBI, the RBI website states that:
In terms of Section 45-IA of the RBI Act, 1934, no Non-banking Financial company can commence or carry on business of a non-banking financial institution without a) obtaining a certificate of registration from the RBI and without having a Net Owned Funds of ₹ 25 lakhs (₹ Two crore since April 1999). However, in terms of the powers given to the RBI, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking companies registered with SEBI, Insurance Company holding a valid Certificate of Registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act, 1956, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982,Housing Finance Companies regulated by National Housing Bank, Stock Exchange or a Mutual Benefit company.
On the issue as to what are the requirements for registration with RBI, it is stated that:
A company incorporated under the Companies Act, 1956 and desirous of commencing business of non-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should comply with the following:
(1) it should be a company registered under Section 3 of the companies Act, 1956
(2) It should have a minimum net owned fund of ₹ 200 lakh. (The minimum net owned fund (NOF) required for specialized NBFCs like NBFC-MFIs, NBFC-Factors, CICs is indicated separately in the FAQs on specialized NBFCs).
Please see the RBI website for more details.
Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles.
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