NBFC Registration — RBI CoR Application

Under the Reserve Bank of India Act 1934, specifically the Master Direction — Non-Banking Financial Company — Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions 2016 (updated via RBI circular DOR.CRE.REC.No.60/03.10.001/2021-22 dated October 22, 2021), the minimum Net Owned Fund (NOF) for a new NBFC-ICC (Investment and Credit Company) is ₹10 crore. For NBFC-MFIs, the minimum NOF is ₹5 crore (₹2 crore for the North-East region). NOF is defined as paid-up equity capital plus free reserves minus accumulated losses and intangible assets, after deducting investments in subsidiaries and group companies as specified in the Master Direction. The funds must be held in a fixed deposit with a scheduled commercial bank and a certificate of deposit must be submitted with the RBI application.

Under Section 45-IA of the Reserve Bank of India Act 1934, any company that is a 'financial institution' — whose principal business is receiving deposits or lending or financing — must obtain a Certificate of Registration (CoR) from the RBI before commencing NBFC operations. The 'principal business criteria' is met if more than 50% of total assets are financial assets AND more than 50% of gross income is from financial assets, per RBI's clarification in its 1998 press release. Entities exempt from RBI registration include Housing Finance Companies (regulated by NHB under the National Housing Bank Act 1987), Insurance companies (IRDAI), Stock Brokers (SEBI), Merchant Bankers, and Venture Capital Funds. Companies lending only to group entities, or holding equity investments without lending, may not cross the principal-business threshold and thus may not require CoR — this must be assessed entity-by-entity.

The RBI processes NBFC applications through its Regional Office under Section 45-IA of the Reserve Bank of India Act 1934, and the typical processing time from submission of a complete application is 90 to 180 days, though complex cases or those requiring additional information can take longer. The application is submitted online through the COSMOS portal along with hard copies, and must include: Certificate of Incorporation and Memorandum & Articles of Association (with financial services as the main object), audited financials for the last three years (or since incorporation), a banker's report confirming NOF, a business plan for three years, KYC documents for all directors, a CIBIL report for directors and promoters, and a declaration of no criminal proceedings. If any director is a wilful defaulter or on RBI's caution list, the application will be rejected. We coordinate the COSMOS upload, the physical submission to the relevant Regional Office (Mumbai for most applicants), and respond to RBI queries during processing.

Post-registration, an NBFC must comply with the RBI's Master Direction — Non-Banking Financial Company — Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions 2016 on a continuous basis, including: filing NBS-7 (quarterly statutory return on capital funds and risk-weighted assets), NBS-9 (monthly return for NBFC-D above ₹100 crore), and the annual return on COSMOS. Capital adequacy must be maintained at a minimum CRAR of 15% under the Scale Based Regulation (SBR) framework introduced by RBI circular DOR.CRE.REC.No.60/03.10.001/2021-22. The Fair Practices Code under RBI Master Circular DNBS.CC.PD.No.266/03.10.01/2011-12 must be adopted, and the board must constitute a committee for reviewing the same. NBFC-BL (Base Layer, below ₹1,000 crore) entities face lighter compliance than NBFC-ML (Middle Layer) entities, which require an Internal Capital Adequacy Assessment Process (ICAAP) from FY 2026-27 onwards.

An existing private limited company can apply for NBFC registration under Section 45-IA of the Reserve Bank of India Act 1934 provided its Memorandum of Association includes financial services — specifically money lending, investment, or hire purchase — as the main object clause. If the existing MoA does not include these objects, an alteration is required under Section 13 of the Companies Act 2013 with a special resolution and ROC filing via Form MGT-14. The company must then build up NOF to the required threshold (₹10 crore for NBFC-ICC) and convert its existing operations or assets to the financial-asset-dominant structure that satisfies the principal-business criteria. It is often more efficient to convert an existing dormant or shell company than to incorporate a new entity, as it avoids the three-year audited financials gap — though the RBI does accept applications from newly incorporated companies with even one year of accounts if accompanied by a robust business plan.