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WHAT IS A NBFC?
Non Banking Financial Company is just afterward bank, registered below Companies Act of India and having a legitimate license issued by the Reserve Bank of India. NBFCs are energetic in the event of loans, advances, accepting deposits, insurance, asset meting out and new financial attributable as allowed by the Reserve bank of India.
RESTRICTIONS ON NBFCs.
A Non Banking Financial Company cannot assume following transactions as forbidden by the Reserve Bank of India:
- A NBFC cannot take demand deposits.
- NBFC cannot matter cheque in its own name
- Depositors of NBFCs are not covered by depositors Insurance.
WHEN DOES A COMPANY BECOMES LIABLE TO APPLY FOR NBFC LICENSE?
A company is required to purchase license for RBI for NBFC registration only if its principal event involves financial activities. In order to separate any secrecy the departments has clarified that for a company financial bustle shall be considered as principal commotion if:
- Financial Assets contribute 50% or more of the total assets
- And pension from financial assets contribute 50% or more of the total terrifying income.
This exam is popularly known as 50-50 exam for NBFC.
COMPANIES INVOLVED IN FINANCIAL ACTIVITIES BUT ARE NOT LIABLE TO TAKE LICENSE OF NBFC FROM RBI:
Some companies full of zip in financial comings and goings are not required to apply for or obtain NBFC license form the Reserve Bank of India this is because of the fact that they are inborn governed by supplementary laws or enactments. Some of these companies are:
- NIDHI Company – Regulated by Companies Act, 2013
- Housing Finance Companies – Regulated by the National Housing Bank
- Mutual Funds – Regulated by Securities and Exchange Board of India
- Insurance Companies – Regulated by Insurance Regulatory and Development Authority of India (IRDA)
- Stock Broking – Regulated by Securities and Exchange Board of India
ELEGIBILITY CRITERIA FOR APPLYING FOR A NBFC LICENSE IN INDIA.
- The entity must be a company either Private Limited or Public Limited registered below Companies Act, 2013.
- Company if already lively in financial sector must have recognized 50-50 test as prescribed for NBFCs
The company must have a minimum Net Owned Funds of Rs. 2 crores.