NBFC Compliance

NBFC or Non-Banking Financial Companies or NBFCs are companies that are involved in the business of receiving deposits, advances, and loans, and acquisition of stock, shares and bonds, debentures, and securities that granted by the govt and are registered under the businesses Act 2013. There was a time when Annual Compliances of NBFCs in India were far simpler and indulgent but after the Sahara case, RBI has declared new NBFC compliances under their screening. To make the process easy, get guidance from our expert team!

What is NBFC?

Non – Banking Financial Companies are the financial institutions that provide banking services, but don't hold any banking license. A Non-Banking Institution has the principal business of receiving deposits under any scheme or arrangement or in the other manner. Such deposits and can be received in one lump – sum or in installments by way of contribution.

What does ‘Principal Business’ mean in NBFC?

The financial activity of any registered company becomes ‘principal business’ when a company’s financial assets constitute more than 50 percent of the total assets and income from financial assets constitutes more than 50 percent of the gross income. The company fulfilling both these criteria than that company is eligible for registering as NBFC by RBI. Reserve Bank of India Act, doesn't define the term ‘principal business’, however, RBI has defined that only companies which are mainly engaged in financial activity get registered with RBI and are regulated and supervised by it. Hence, therefore if the companies engaged in agricultural operations, purchase and sale of goods, sale or construction of the immovable property, industrial activity, as their principal business and are doing some financial business during a small way, these don't fall into the category which may be regulated by the Reserve Bank[1].

Different Categories of NBFCs Registered with RBI

Categories of NBFCs are often differentiated in terms of sorts of liability, like Deposit and Non – Deposit accepting.

Types of NBFCs or Non-Banking Financial Companies

The types of NBFC or Non-Banking Financial Companies on the basis of Liabilities and

Activities are mentioned below:

• NBFCs based on Liabilities
• Deposit Accepting NBFCs;
• Systematically Important (NBFC-ND-SI);
• Non-Deposit Accepting NBFCs;
• Other Non-Deposit Holding Companies;
• NBFCs based on Activities
• Investment and Credit Company (ICC);
• Infrastructure Finance Company (IFC);
• Systemically Important Core Investment Company (CIC);
• Mortgage Guarantee Companies;
• NBFC- Non-Operative Financial Holding Company (NOFHC);
• NBFC- Microfinance Companies (MFIs);
• NBFC-Factors;
• Infrastructure Debt Fund Non-Banking Financial Company (IDF-NBFC)

Checklist for NBFC- D(Deposit-taking)

• In contrast to Non-deposit NBFCs, NBFC-D (Deposit Taking ) institutions need to file a couple of returns on the idea of deposits held by the corporate.
• NBS 1- Quarterly returns on Deposits in First Schedule
• NBFC-D type institutions need to submit quarterly returns on Prudential Norms.[NBS-2]
• NBS 3- Quarterly return on Liquid Assets
• An annual return of critical parameters by rejected companies in holding public deposits [NBS-4]
• NBS 5 – WITHDRAWN
• NBS 6- Monthly Return on exposure to capital market by NBFC-D with total assets of Rs. 100 crore and more
• Half-Yearly ALM returns by institutions holding deposits worth Rs. 20 crore and more or with an asset size of Rs. 100 crore and more.
• Audited Balance sheet and Auditor’s report by NBFC-D
• In conclusion, meeting the Annual Compliance of NBFC Compliance has become a high-maintenance affair. Careful study of the procedures may be a must so as to avoid being in violation of compliance requirements.