NBFCs contribution towards the country’s economy has been tremendous over the few years. And needless to say, NBFCs are a major reason for the growth that India has experienced. From providing credit to individuals who are in need to fulfilling the financial requirements of the micro, small and medium enterprises, NBFCs brought inn a new phase of banking and did it in a much better way.
Financial inclusion is defined as a situation in which individuals and businesses are given access to valuable and affordable financial products and services that encounter their needs and are delivered in a responsible and sustainable way. Financial inclusion is defined as the availability and equality of opportunities to access financial services.
Objectives of Financial Inclusion
Financial inclusionaims to help people obtain and acquirefinancial services and products at inexpensive prices. Some of these services include deposits, fund services, loans, insurance, payment services, etc.
It aims to establish proper financial institutions that satisfies the needs of the poor people and individuals who are neglected by banks and similar institutions.
Importance of Financial Inclusion
- It helps individuals to make daily payments on a constant basis.
- It helps the businesspersons to access credit which can be invested in their small scale activities that generates income.
- It helps people to involve in various cash saving activities so that they can make future investments or counter unforeseeable risks accordingly.
Definition of Non-Banking Financial Companies (NBFCs)
They are engaged in the business of loans and advances, acquisition of shares, stocks, bonds, debentures, securities issued by the Government or other marketable securities of leasing, insurance business.
In order to undertake activities related to financial inclusion, it is mandatory to apply for a NBFC License and establish a Non-Banking Financial Company (NBFC).
Documents required to obtain NBFC License in India
Certain documents should be submitted along with the application form to RBI within a stipulated time period. Some of the important documents required are as mentioned below–
- Certified copies of Certificate of Commencement of Business and Certificate of Incorporation of the company.
- Certified copies of Articles of Association (AOA) ad Memorandum of Association (MOA) of the company
- Copies of PAN/CIN made for the company.
- Director’s profile filled and signed by every director.
- Experience certificate of the directors from the NBFCs from where the directors have gained experience related to NBFC.
- The CIBIL Data concerning the directors of the company.
- Certified copy of the Board Resolution for the presentation of “Fair Practices Code”.
- Board Resolution in particular that approves the submission of the application and authorizing signatory.
- Board Resolution that the company has not kept any deposits and has not accepted any public deposits. Also, it must mention that it will not accept any in the near future without any prior approval from the Reserve Bank of India.
- Board resolution that mentions that the company does not own any NBFC unregistered NBFC and no business activities are being initiated without getting it registered from RBI.
- Financial Statements of the previoustwo years of Unincorporated Bodies.
- A list that mentions Authorized Share Capital and the updated shareholding outine of the enterprise.
- Copies of Fixed Deposit receipt and Bankers certificate that mentions balances of Net Owned Funds.
- The details of Profit & Loss account and Audited Balance Sheet of three years along with directors & auditors report.
- Details related to bank accounts/ postal address of the branch/bank, loan/credit facilities.
- Self-attested Bank Statement/Income Tax returns.
- The business strategy or plan of the firmof the next three years clearly mentioningessential details about the business, market segment and balance sheets, cash flow statement, asset or income statement without any inclusion of public deposits.
NBFC Registration Process in India
Following the mentioned steps in the registration process is crucial for the timely establishment of the company.
- Company Registration as per the Act
The company must be registered under the Companies Act 2013 or Companies Act 1956.
- Possessionof Net Owned Funds
A minimum Net Owned Funds (NOFs) must be held by the company. The amount must be Rs2 crores or more.
There must be at least one director in the company.
Maintaining a Good CIBIL score is essential as it is an important aspect that is considered and it fulfills the eligibility requirements to register as an NBFC.
- Filing of the Application form
The next step in the process is to file an application form on the website of RBI.
- Submission of important documents
The next step in the registration process is the submission of all the documents. The applicant must submit the required documents along with the application form before the stipulated time.
- Acquiring the CARN Number
After the submission of the application form and the documents, a CARN number will be provided to the applicant.
- Submission of the application form
Hard copy of the application must be submitted to the regional branch of RBI.
- Obtaining the NBFC License
After the application is approved and verified, the License will be provided to the company.
Types of Non-Banking Financial Companies(NBFC)
The categorization of the NBFCs are done on the basis of two important factors which are as follows –
- On the basis of nature of activity
- On the basis of deposits
On the basis of nature of activity, they are divided into-
- Asset Finance Company
- Investment Company
- Loan Company
- Core Investment Company
- Infrastructure Finance Company
- Core Investment Company
- Micro Finance Company
Asset Finance Company
An asset finance company is a firm that lends burrowers any asset for a temporary duration.
Investment Company
The major objective of an investment company is the acquisition of securities.
Loan Company
A loan company is a Non –Banking Financial Company that functions with the major objective of providing loans and advances to the public.
Infrastructure Finance Company (IFC)
An Infrastructure Finance Company refers to a corporation that comprises net-owned funds of a minimum of 300 Crores out of which a minimum of 75% of its total assets is utilized in infrastructure loans.
Systematically Important Core Investment Company
A company that has the ownership of assets of 100 Crores and above out of which 90% of the assets are used and invested in the form of loans in various companies is called a Systematically Important Core Investment Company.
Infrastructure Debt Fund
Infrastructure debt fund or IDF is established to fulfill the requirements of the infrastructure industry. The funds invested in IDF are utilized for construction purposes of buildings, roads, bridges, dams and similar public properties.
Micro Finance Corporation (Small Finance Bank)
Also called small finance bank, these institutions are established with the aim to provide banking services to the less privileged sections of society.
On the basis of deposits, they are categorized into two types –
- Deposit accepting Non-Banking Financial Corporations
- Non-deposit accepting Non-Banking Financial Corporations
Conclusion
Financial Inclusion is a significant activity that must be conducted in every country. The Non – Banking Financial Companies (NBFCs) have contributed in a significant manner to create and provide financial services to various corporations and individuals in need. |
