Non-banking financial companies, or NBFCs, are financial institutions that provide certain types of banking services, but do not hold a banking license. Generally, these institutions are not allowed to take deposits from the public, which keeps them outside the scope of traditional oversight required under banking regulations. NBFCs can offer banking services such as loans and credit facilities, retirement planning, money markets, underwriting, and merger activities.

A Non-Banking Financial Company (NBFC)registered under the Companies Act, 2013 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).

The registration of Non-Banking Financial Companies (NBFCs) in India is governed by the Reserve Bank of India (RBI) under the regulatory framework laid out in the Reserve Bank of India Act, 1934. NBFCs are financial institutions that engage in financial activities similar to banks but do not hold a banking license

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    1. Minimum Requirements:
    The company must be registered under the Companies Act, 2013.
    The company should have a minimum net owned fund (NOF) of Rs. 2 crores.

    2. Application to RBI:
    Submit an online application to the Regional Office of the RBI through the COSMOS platform.
    The application should include details about the company, its directors, the proposed financial activities, and other relevant information

    3. Fit and Proper Criteria:
    The directors and the management team must meet the fit and proper criteria set by the RBI.

    4.Due Diligence and Inspection:
    The RBI may conduct a due diligence check on the applicant, including the background of promoters, directors, and the business plan.
    The RBI may also conduct an inspection of the registered office of the company.

    5. Submission of Documents:
    Submit the necessary documents, including the Certificate of Incorporation, Memorandum and Articles of Association, details of the directors, audited financial statements, and other relevant documents.

    6. Capital Adequacy:
    Ensure that the NBFC meets the minimum capital adequacy requirements specified by the RBI.

    7. Approval from RBI:
    Once the RBI is satisfied with the application and due diligence, it may grant the Certificate of Registration.

    8. Post-Registration Compliance:
    Comply with the ongoing regulatory requirements, including periodic reporting to the RBI, maintenance of statutory reserves, and other prudential norms.

    9. Prudential Norms and Regulations:
    Adhere to prudential norms and regulations prescribed by the RBI concerning capital adequacy, income recognition, asset classification, and provisioning.

    9. Start Operations:

    Once the FPC is registered and operational, it can engage in agricultural and allied activities for the benefit of its farmer members.

    It’s important to note that the regulatory framework for NBFCs may be subject to changes, and it’s advisable to refer to the latest guidelines issued by the RBI.

    Additionally, seeking professional advice and assistance from legal and financial Webetax experts is recommended to ensure compliance with all regulatory requirements.

    Keep in mind that the above steps provide a general overview, and the specific requirements may vary based on the nature of your business and any updates in regulations. It’s recommended to consult with webetax professionals or legal experts for personalized guidance.

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