1. The
first step is to form a new Company registered under the Companies Act, 1956.
The name must reflect the character of an NBFC. Words such as Investment,
Finvest, Finstock, Finance etc. may be used as part of the name. In general,
RBI does not allow names which are not reflecting the characteristics of NBFC.
2. After
the incorporation of a new company the Paid up Equity Capital of the Company
should suitably rose either at par or premium so as to attain a minimum Net
Owned Fund of Rs. 2 crores. The Capital to be raised here should be Equity
Share Capital and not Preference Share Capital.
3. Opening
of a Bank Account: The entire sum of Rs. 2 crores should be kept in a bank in a
Deposit Account free from all liens. Normally funds are kept in Fixed Deposit.
The RBI at the time of considering the application for the grant of Certificate
of Registration verifies the deposits held by the Company with the Bankers.
4. Apply
for Certificate of Registration to RBI alongwith Required Documents.
Foreign
Direct Investment
FDI in Non-Banking Finance
Companies (NBFC)
FDI in Non-Banking Finance
Companies (NBFC)
FDI in Non-Banking Finance
Companies (NBFC) is allowed up to 100% under the automatic route in only the
following activities:
(i) Merchant Banking
(ii) Under Writing
(iii) Portfolio Management
Services
(iv) Investment Advisory
Services
(v) Financial Consultancy
(vi) Stock Broking
(vii) Asset Management
(viii) Venture Capital
(ix) Custodian Services
(x) Factoring
(xi) Credit Rating
Agencies
(xii) Leasing &
Finance
(xiii) Housing Finance
(xiv) Forex Broking
(xv) Credit Card Business
(xvi) Money Changing
Business
(xvii) Micro Credit
(xviii) Rural Credit
The other conditions in
this regard are:
(1) Investment would be
subject to the following minimum capitalisation norms:
(i) US $0.5 million for
foreign capital up to 51% to be brought upfront
(ii) US $ 5 million for
foreign capital more than 51% and up to 75% to be brought upfront
(iii) US $ 50 million for
foreign capital more than 75% out of which US$ 7.5 million to be brought
upfront and the balance in 24 months.
(iv) 100% foreign owned
NBFCs with a minimum capitalisation of US$ 50 million can set up step down
subsidiaries for specific NBFC activities, without any restriction on the
number of operating subsidiaries and without bringing in additional capital.
The minimum capitalization condition shall not apply to downstream
subsidiaries.
(v) Joint Venture
operating NBFCs that have 75% or less than 75% foreign investment can also set
up subsidiaries for undertaking other NBFC activities, subject to the
subsidiaries also complying with the applicable minimum capitalisation norm
mentioned in (i), (ii) and (iii) above and (vi) below.
(vi) Non- Fund based
activities : US $0.5 million to be brought upfront for all permitted non-fund
based NBFCs irrespective of the level of foreign investment subject to the
following condition:
It would not be
permissible for such a company to set up any subsidiary for any other activity,
nor it can participate in any equity of an NBFC holding/operating company.
The following activities
would be classified as Non-Fund Based activities:
(a) Investment Advisory
Services
(b) Financial Consultancy
(c) Forex Broking
(d) Money Changing
Business
(e) Credit Rating Agencies
(vii) This will be subject
to compliance with the guidelines of RBI.
(i) Credit Card business
includes issuance, sales, marketing and design of various payment products such
as credit cards, charge cards, debit cards, stored value cards, smart card,
value added cards etc.
(ii) Leasing & Finance
covers only financial leases and not operating leases.
(2) The NBFC will have to
comply with the guidelines of the relevant regulator/ s, as applicable.
Khusboo Agrawal
KLB & Associates
8790418875
Hyderabad
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