Setting up a Non-Banking Financial Company in India in 2023
A Non-Banking Financial Company (NBFC) is an excellent corporate vehicle for businesses engaged in i) loans ii) home finance iii) merchant banking iv) stock, bond and debenture broking v) venture capital vi) mutual benefit funds and vii) insurance activities in India.
Why set up an India NBFC?
- India is experiencing rapidly-growing demand for microfinance due to its large, low-income, unbanked population;
- In Q3 2019, the loan value of the Indian microfinance industry grew at 24.2% year-on-year to US$28 billion. The value of NBFC loans amounted to US$8.66 billion;
- Because of the above, the Indian microfinance industry has huge upside potential. To date, only a third of low-income Indian households are currently served by microfinance providers, including NBFCs;
- An NBFC can be 100% foreign-owned.
Legal and regulatory considerations
- NBFCs are regulated and licensed by the Reserve Bank of India (RBI), India’s central bank;
- The probability of a company securing an NBFC licence depends upon i) the company profile, activities and scope ii) the applicant’s net assets iii) the type of liabilities;
- Unlike a bank, an NBFC i) is not subject to reserve ratios ii) cannot accept demand deposits and iii) is not integrated into the banking payments and settlements system;
- An NBFC requires minimum net owned funds of US$260,000;
- Each NBFC must have at least one director;
- The company must submit i) an annual audited financial statement ii) a statutory return on deposits taken and iii) a quarterly return on the company’s liquid assets;
- An NBFC with i) a public deposit of at least US$262 million or ii) assets of at least US$1.31 billion must submit a half yearly Asset Liability Management return;
- The RBI publishes a list of registered NBFCs.
Accounting and Tax considerations
Please refer to our India Accounting and Tax page for details.
Healy Consultants Group PLC will project-manage NBFC company registration and licensing from A to Z for our Client. This includes i) registering the company at the RBI and ii) applying for NBFC status at the RBI. See PDF below for a quote for our standard services package.
Additionally, our firm offers support services such as: i) accounting and bookkeeping ii) India business auditing and iii) assistance with recruiting employees.