CA Manish Mishra

𝐍𝐁𝐅𝐂 𝐍𝐞𝐰 𝐋𝐢𝐜𝐞𝐧𝐬𝐞 𝐯𝐬. 𝐍𝐁𝐅𝐂 𝐓𝐚𝐤𝐞𝐨𝐯𝐞𝐫

Embarking on a new venture requires meticulous groundwork. From market analysis to business model formulation, thorough research is imperative to identify niche opportunities and mitigate risks.

Obtaining a new NBFC license involves navigating through a rigorous application process and adhering to the regulatory framework set forth by the Reserve Bank of India (RBI). This includes the requirement of a minimum net owned fund (NOF) of Rs. 10 Crore, which is not required for existing NBFCs with Rs. 2 Crore, and furnishing detailed financial projections, business plans, and compliance strategies.

After obtaining a new license, stringent regulatory compliance is paramount. Upholding capital adequacy norms, adherence to lending guidelines, and ensuring robust risk management mechanisms are pivotal for sustained operations.

While a new license offers autonomy and flexibility, it takes time to establish a market presence and garner customer trust. Patience and strategic agility are essential for nurturing growth in this trajectory.

Acquiring an existing NBFC presents an expedited route to market entry and expansion. Thorough due diligence is imperative to assess the target company's financial health, operational efficiency, and cultural compatibility.

Seamless integration of acquired operations, systems, and workforce is pivotal for ensuring synergy and maximizing operational efficiency. Overlooking this aspect could potentially lead to disruptions and inefficiencies.

Acquiring an established NBFC mitigates certain risks associated with market entry, regulatory compliance, and brand reputation. However, meticulous evaluation of the target company's financial and regulatory landscape is crucial to mitigate unforeseen liabilities.

A successful hashtag hashtag grants immediate access to an established customer base, bolstering revenue streams and cross-selling opportunities. Leveraging the acquired entity's brand equity and market presence can expedite growth and consolidation efforts.

Whether opting for a new license or a takeover, obtaining RBI's approval is indispensable. Thorough documentation, adherence to fit and proper criteria, and shareholder consent are pivotal facets of the approval process.

Comprehensive due diligence is imperative to unearth any legal, financial, or operational discrepancies. This involves scrutinizing fiscal records, regulatory compliance, and contractual obligations.

After an acquisition, it is crucial to adhere to regulatory norms governing NBFCs and mergers. This includes meeting capital adequacy requirements to maintain NOF of Rs. 5 Crore by 2025 and Rs. 10 Crore by 2027, following lending norms, and fulfilling reporting obligations.

𝐂𝐮𝐫𝐢𝐨𝐮𝐬 𝐦𝐨𝐫𝐞 𝐚𝐛𝐨𝐮𝐭 𝐍𝐁𝐅𝐂𝐬 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐋𝐞𝐧𝐝𝐢𝐧𝐠 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬?

Visit my YouTube channel and see the full Video on the basics of NBFC!

https://lnkd.in/g7cJNAjh

Looking to start your journey in the NBFC space but finding the 10 Crores NOF requirement a hurdle?

Here's a strategic approach to kickstart your NBFC journey without breaking the bank!

So, what's the workaround? 👇

🔹 Consider NBFC Takeover: Opting for an existing NBFC acquisition offers a viable solution. By partnering with the current management through an MOU, you can commence operations promptly while concurrently pursuing the NBFC takeover process.

🔹 Timeline Flexibility: Unlike the stringent initial requirement, the existing NBFC takeover route provides a timeline to meet the NOF criteria. By 2025, it's set at 5 Crores, and by 2027, it escalates to 10 Crores, easing the financial burden for newcomers.

🔹 Risk Mitigation: Engage seasoned professionals proficient in NBFC workings and compliance to conduct a comprehensive compliance audit. This proactive step helps mitigate potential risks associated with non-compliant entities.

Key Takeaway: While the regulatory landscape presents challenges, leveraging existing NBFCs coupled with diligent compliance practices can pave the way for a smoother entry into the market.

Ready to embark on your NBFC journey? Let strategic planning and compliance expertise be your guiding lights!

Visit My YouTube Channel!

https://lnkd.in/g7cJNAjh

In my series of posts on NBFCs, after exploring WHY you need an License, WHAT NBFCs are, and the ADVANTAGES of having an NBFC license, now let me tell you about the key prerequisites and processes to obtain the NBFC license from the Reserve Bank of India (RBI)!

✅ Director Experience: Ensure your directors have relevant experience in NBFC or banking sectors.

✅ Business Plan: Have a robust business plan in place.

✅ Credit History: Maintain a good credit history for your company, directors, and shareholders.

✅ Company Registration: Register your company as a Private Limited or Public company with a name indicating financial services.

✅ Minimum Net Owned Fund (NOF): Meet the NOF requirement of Rs. 10 Crore and deposit it into a designated bank account.

✅ Online Application: File an online application on the Reserve Bank of India (RBI) website, submitting necessary documents including audited financial statements, director profiles, and business plans.

✅ Physical Submission: Submit physical copies to the regional RBI office for verification.

✅ Final Approval: Once verified, the application is forwarded to the central office for final approval.

✅ License Criteria: RBI grants the NBFC license based on criteria such as the company's ability to repay investors, capital infusion capability, and compliance with regulations.

✅ Permanent License: Once granted, the NBFC license is permanent unless surrendered or canceled by RBI.

Curious about more about NBFCs?

Visit my YouTube channel and see the full Video on the basics of NBFC!

https://lnkd.in/gaC-WGB4

On March 17, 2022, the Reserve Bank of India (RBI) issued a crucial notification regarding the Net Owned Fund (NOF) requirement for certain Non-Banking Financial Companies (NBFCs) to commence or carry on their operations as a non-banking financial institution. This regulation, which came into force on October 1, 2022, aims to ensure the stability and resilience of the NBFC sector.
Key Points from the Notification:
🔹 Minimum NOF Requirement: The NOF requirement has been set at 10 Crore Rupees.
🔹 Glide Path for Existing NBFCs: Existing NBFCs, holding a certificate of registration as of October 22, 2021, with a net owned fund of less than ten Crore Rupees, are required to achieve the NOF of 10 Crore Rupees according to a specified glide path.
🔹 Categorized NBFCs and Timeline: NBFCs are categorized based on their type, and they have specific timelines to meet the NOF requirements. For instance, NBFCs like Investment and Credit Companies (NBFC-ICC) and Micro Finance Institutions (NBFC-MFI) in the North Eastern Region have until March 31, 2025, to reach 5 Crore Rupees and until March 31, 2027, to attain 10 Crore Rupees.
🔹 Compliance Deadline for Other NBFCs: NBFCs like Micro Finance Institutions (NBFC-MFI) and Factors (NBFC-Factor) need to achieve 7 Crore Rupees by March 31, 2025, and 10 Crore Rupees by March 31, 2027.
It's imperative for existing and aspiring NBFCs to align their strategies and resources to meet these NOF requirements within the stipulated timelines.
For a comprehensive understanding of NBFC fundamentals and regulatory updates, check out my YouTube channel, where I delve deeper into the essentials of NBFC operations and compliance.
Link to the full video: https://lnkd.in/g7cJNAjh

In our recent series of posts on NBFC, we've delved into the WHY NBFC License and WHAT are NBFCs, and now let's explore the ADVANTAGES of having an NBFC license.

🔹 Lending & Credit Facilities: NBFCs empower individuals and businesses by providing essential loans and credit facilities.

🔹 Diverse Financial Services: From trading in money market instruments to wealth management, NBFCs offer a wide array of financial services catering to varied needs.

🔹 Agility & Technological Edge: Unlike traditional banks, NBFCs operate with agility and harness the power of technology to reach customers faster and more efficiently.

🔹 Financial Inclusion: Through strategic partnerships and leveraging databases, NBFCs ensure wider financial inclusion, reaching even the most remote areas.

🔹 Customized Solutions: With a deep understanding of customer profiles and needs, NBFCs can tailor their products and services, enhancing customer satisfaction.

Previous Posts
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Visit my YouTube channel and see the full Video on the basics of NBFC.

https://lnkd.in/g7cJNAjh

The NBFC landscape is evolving rapidly, driven by innovation and a commitment to serving the diverse financial needs of our dynamic economy. As we continue to explore the nuances of NBFCs, let's harness their potential to fuel India's growth story!
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In the world of finance, the term "principal business criteria" holds significant importance, especially for companies seeking registration as Non-Banking Financial Companies (NBFCs) with the Reserve Bank of India (RBI). But what exactly does this criterion entail, and why is registration essential?

The core concept of principal business criteria, essentially means that a company's primary revenue and assets stem from financial activities. These activities encompass a wide range of financial instruments, including stocks, bonds, derivatives, loans, and various other securities. When more than 50% of a company's total assets consist of financial assets and over 50% of its gross income arises from activities related to these financial assets, it falls under the ambit of being primarily engaged in financial activities.

Any entity meeting the Principal Business Criteria needs to get registered as an NBFC with and after getting an NBFC license these entities can play a crucial role in the financial ecosystem by providing essential services such as lending, investing, trading, and offering financial products.

By obtaining , these companies gain credibility, trust, and regulatory oversight, ensuring financial stability and consumer protection within the financial system.

See the full Video on YouTube
https://www.youtube.com/

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