A Detailed Guide to Obtaining an RBI Certificate of Registration
Introduction
Non-Banking Financial Companies play an important role in India’s financial system by providing loans, asset finance, investment services, microfinance and other specialised financial products. They often serve individuals and businesses that may not receive adequate financial support through traditional banking channels.
However, a company cannot begin lending or investment activities as its principal business merely by incorporating itself under the Companies Act, 2013. Subject to the applicable exemptions, it must obtain a Certificate of Registration from the Reserve Bank of India under Section 45-IA of the Reserve Bank of India Act, 1934. A company carrying on NBFC activities without the required registration may face monetary penalties, prosecution and other regulatory action.
Meaning of an NBFC
A Non-Banking Financial Company is a company incorporated under the Companies Act that carries on financial activities as its principal business. These activities may include providing loans and advances, financing assets, acquiring shares and securities, offering microfinance loans or conducting other financial activities permitted by the RBI.
The most common category is the Investment and Credit Company, commonly known as an NBFC-ICC. It may undertake asset finance, provide loans or advances and acquire securities, provided it does not fall within another specialised NBFC category.
A company does not become an NBFC merely because it occasionally lends surplus funds or invests in securities. Its financial activities must satisfy the principal business criteria prescribed by the RBI.
Principal Business or 50-50 Test
The RBI generally applies the “50-50 test” to determine whether a company is carrying on financial activities as its principal business. Under this test, more than 50% of the company’s total assets must be financial assets, and more than 50% of its gross income must arise from those financial assets.
Both conditions must ordinarily be satisfied. For example, a manufacturing company that invests some surplus money in mutual funds may not require NBFC registration where its main assets and income continue to arise from manufacturing. However, a company primarily earning income from loans and financial investments may fall within the NBFC regulatory framework.
Difference Between an NBFC and a Bank
Although NBFCs provide loans and undertake investments similar to banks, they are not banks. An NBFC cannot accept demand deposits such as savings or current account deposits. It also does not form part of the payment and settlement system and cannot issue cheques drawn on itself.
Further, deposits accepted by an eligible deposit-taking NBFC do not receive insurance protection from the Deposit Insurance and Credit Guarantee Corporation. Only specifically authorised NBFCs holding an appropriate deposit-accepting Certificate of Registration may accept public deposits.
Is RBI Registration Mandatory?
Section 45-IA of the RBI Act provides that a company cannot commence or carry on the business of a non-banking financial institution without obtaining a Certificate of Registration from the RBI and maintaining the prescribed Net Owned Fund.
The general minimum Net Owned Fund requirement for a new NBFC applicant is ₹10 crore. New applicants must maintain this amount from the beginning of the registration process. Existing NBFCs covered by the transition provision have been given time until March 31, 2027, to achieve the ₹10 crore requirement.
Specialised NBFC categories may have different capital requirements. For example, the minimum Net Owned Fund is ₹2 crore for an NBFC Account Aggregator and an NBFC Peer-to-Peer Lending Platform, while a Housing Finance Company generally requires ₹20 crore. Infrastructure Finance Companies and Infrastructure Debt Fund NBFCs are subject to higher requirements of ₹300 crore.
Meaning of Net Owned Fund
Net Owned Fund is not simply the amount shown as paid-up share capital in the company’s balance sheet. It is broadly calculated after considering paid-up equity capital and eligible free reserves and then deducting accumulated losses, deferred revenue expenditure, intangible assets and certain excessive investments or exposures to group companies.
Therefore, promoters should obtain a proper certificate from a Chartered Accountant confirming that the company satisfies the applicable Net Owned Fund requirement. Merely depositing ₹10 crore into the company’s bank account may not automatically establish the required NOF where the company has losses, intangible assets or disqualifying investments.
Major Categories of NBFCs
NBFCs are classified according to their liabilities, activities and placement under the RBI’s Scale-Based Regulatory Framework. Based on liabilities, an NBFC may be deposit-taking or non-deposit-taking. Based on regulatory scale, it may fall within the Base Layer, Middle Layer, Upper Layer or Top Layer.
Activity-based categories include Investment and Credit Companies, Housing Finance Companies, Core Investment Companies, Microfinance Institutions, Infrastructure Finance Companies, Factors, Account Aggregators and Peer-to-Peer Lending Platforms.
The appropriate category should be determined before filing the application because the eligibility criteria, capital requirement, business restrictions and continuing compliances may differ for each category.
Eligibility Conditions for NBFC Registration
The applicant must be incorporated as a company under the Companies Act, 2013 or the earlier Companies Act. An LLP, partnership firm or proprietorship cannot obtain a standard NBFC Certificate of Registration because Section 45-IA applies to companies.
The company’s Memorandum of Association should contain suitable financial business objects. The applicant must also maintain the prescribed Net Owned Fund and demonstrate a genuine and sustainable financial business model.
The RBI examines the background, experience, competence and financial integrity of promoters, shareholders and directors. The management should satisfy the fit-and-proper criteria and should not have a history involving financial fraud, wilful default, serious criminal proceedings or association with entities whose NBFC applications were rejected or registrations cancelled.
Application Process for NBFC Registration
The first step is to incorporate a company with appropriate financial objects and arrange the required capital from legitimate and properly documented sources. Promoters should prepare a clear business plan explaining the proposed lending model, target customers, source of funds, interest-rate structure, credit assessment process, risk management system and projected financial position.
The company must submit its NBFC registration application through the RBI’s PRAVAAH portal. The correct application form and category-specific checklist should be selected from the RBI’s NBFC forms section.
The application is examined by the RBI, which may seek additional information or clarification. The RBI is not required to approve an application merely because the minimum capital has been arranged. It must be satisfied that the company’s management, capital structure, business plan and operational arrangements are suitable and that granting registration will not be prejudicial to public interest.
Documents Required for Registration
The application normally includes the Certificate of Incorporation, Memorandum and Articles of Association, PAN, registered-office details, board resolution approving the application, shareholding structure and details of promoters and directors.
The company may also be required to provide bank statements, source-of-funds evidence, a Chartered Accountant’s Net Owned Fund certificate, audited or provisional financial statements, credit reports, directors’ experience profiles and declarations concerning regulatory, criminal and enforcement proceedings.
A detailed business plan, projected balance sheets, profit-and-loss estimates, lending policy, risk-management framework, fair-practices code, KYC policy and information-technology arrangements may also be examined. The RBI’s checklist is indicative, and the regulator may request further documents where necessary to determine the applicant’s eligibility.
Compliance After Registration
Obtaining the Certificate of Registration is only the beginning of NBFC compliance. The company must comply with the RBI’s Scale-Based Regulatory Framework, prudential norms, KYC and anti-money-laundering requirements, fair-practices code, asset-classification requirements and applicable reporting obligations.
The NBFC must maintain the required capital adequacy, recognise non-performing assets properly, create necessary provisions and submit periodic returns to the RBI. It must also maintain an effective customer grievance-redressal mechanism and ensure transparent disclosure of interest rates, processing charges, penalties and loan conditions.
Material changes in ownership, control or management may require prior RBI approval. An NBFC must therefore evaluate regulatory requirements before issuing or transferring substantial shareholding, changing promoters or appointing new management.
Registration Exemption Introduced in 2026
On April 29, 2026, the RBI introduced the concept of an Unregistered Type I NBFC. A company satisfying the principal business criteria may remain exempt from registration where it does not access public funds, has no customer interface and has an asset size below ₹1,000 crore.
This exemption is intended for companies carrying on a long-term business model using only their owned funds without interacting with customers. Loans from directors or shareholders are considered public funds, while lending, guarantees and inter-corporate deposits to group entities may constitute customer interface.
A company intending to access public funds or have customer interface must obtain registration as a Type II NBFC before beginning such activities. Companies without public funds or customer interface but having assets of ₹1,000 crore or more must obtain registration as Type I NBFCs.
Consequences of Operating Without Registration
A company that carries on lending, investment or deposit-related financial activities as its principal business without the required RBI registration violates the RBI Act. Such contravention may result in penalties, fines, prosecution and restrictions on continuing the financial activity.
The RBI may also cancel an existing Certificate of Registration where an NBFC fails to comply with regulatory directions or no longer satisfies the conditions subject to which the certificate was granted.
Conclusion
NBFC registration is a detailed regulatory process requiring more than company incorporation and minimum capital. The applicant must select the correct NBFC category, satisfy the principal business criteria, maintain the prescribed Net Owned Fund and demonstrate competent management, transparent funding and a sustainable business model.
Businesses should also evaluate the limited 2026 exemption for entities operating without public funds or customer interface. Where RBI registration is required, financial activities should not begin until the Certificate of Registration has been obtained. Proper planning, accurate documentation and continuing RBI compliance are essential for establishing and operating a legally compliant NBFC in India.
