Navigating the complex landscape of Non-Banking Financial Company (NBFC) compliance in India is crucial for sustainable growth and avoiding penalties. The Reserve Bank of India (RBI) has strict guidelines that NBFCs must follow including timely reporting, maintaining capital adequacy and adhering to fair practice codes. For many NBFCs, especially smaller ones, managing these requirements can be a significant challenge. This is where a professional advisory firm like Praman Advisors Private Limited can be an invaluable partner.
1. Overview:
NBFC compliance refers to the legal and regulatory framework that all non-banking financial companies in India must follow. This framework is primarily governed by the Reserve Bank of India (RBI) and the Companies Act 2013. The main goal of these regulations is to ensure the financial system remains stable and to protect the interests of consumers and investors.
The regulations cover a broad range of areas including:-
- Capital Adequacy: Maintaining a minimum level of capital to absorb potential losses. The minimum Net Owned Fund (NOF) requirement is ₹10 crores.
- Prudential Norms: Guidelines related to income recognition, asset classification and provisioning for bad debts.
- Reporting Requirements: Periodic submission of various returns to the RBI, such as NBS-1, NBS-2, NBS-7 and the Statutory Auditor's Certificate (SAC).
- Fair Practices Code: It is a set of ethical standards for dealing with customers including transparent loan terms and a robust grievance redressal mechanism.
- KYC and AML: Implementing stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) processes to prevent financial crimes.
2. Benefits:
- Expertise: Our team has deep knowledge and extensive experience in NBFC regulations, ensuring that all your compliance obligations are met accurately and on time. This helps you avoid costly mistakes and penalties.
- Proactive Management: Praman Advisors stays updated on the latest regulatory changes and RBI notifications. We help you implement a proactive compliance management system, ensuring your business is always ahead of the curve.
- Tailored Solutions: We offer customized services based on the size and specific needs of the NBFC. Whether you are a small, non-deposit-taking NBFC or a systematically important one, they can provide a solution that fits.
- Risk Mitigation: By ensuring strict adherence to regulations, We help mitigate legal and financial risks, safeguarding your company's reputation and ensuring business continuity.
- Focus on Core Business: By outsourcing your compliance needs, you can free up valuable time and resources to focus on your core business activities, such as product development, customer acquisition and growth.
3. Documents Required:
The specific documents required can vary depending on the type and nature of the NBFC but here is a general list of key documents needed for initial and ongoing compliance:-
- Company Documents:
- Certificate of Incorporation (CoI).
- Memorandum of Association (MoA) and Articles of Association (AoA).
- Board Resolution for NBFC registration and compliance.
- Financial Documents:
- Audited financial statements for the last two to three years.
- Net Owned Fund (NOF) Certificate from a Chartered Accountant.
- Bank statements of the company and promoters.
- Promoter/Director Documents:
- PAN Card and Aadhar Card.
- CIBIL reports to establish financial credibility.
- Educational qualification certificates.
- Other Documents:
- Detailed business plan for the next three to five years.
- Statutory Auditor's Certificate (SAC) confirming compliance with prudential norms.
- Documents related to registration with CERSAI, FIU-IND and Credit Information Companies (CICs).
4. Process to Apply:
The process to avail of NBFC compliance services through Praman Advisors is straightforward:-
- Initial Consultation: You start with a free consultation to discuss your specific needs, the current status of your NBFC and the compliance challenges you face.
- Service Proposal: Based on the consultation, Praman Advisors provides a detailed service proposal outlining the scope of work, a list of required documents and a clear timeline.
- Document Submission: You submit all the necessary documents. The team at Praman Advisors will review and prepare them for filing.
- Application Filing & Monitoring: Praman Advisors handles the entire process of preparing and filing periodic returns and other documents with the RBI and other regulatory bodies. We also provide ongoing support and monitor your compliance status.
- Ongoing Support: We provide continuous advisory services, keeping you informed of new regulations and helping you implement necessary changes to maintain compliance.
5. Fees and Timelines:
The fees for NBFC compliance services are not fixed and depend on several factors including the type and size of your NBFC, the complexity of your operations and the specific services required (e.g. monthly, quarterly or annual filings).
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- Manju Laur: 📞 +97119 94042
Generally, professional fees for NBFC compliance services can vary with some advisory firms offering tiered pricing plans. The timeline for initial registration with the RBI can be lengthy, often taking 04 to 06 months or even longer, as it involves a detailed review and background check by the RBI. However, ongoing compliance filings have specific deadlines set by the RBI and Praman Advisors ensures these are met promptly to avoid penalties.
Frequently Asked Questions
Systemically Important NBFC (NBFC-ND-SI) is a non-deposit-taking NBFC with an asset size of ₹500 crores or more. These NBFCs are subject to stricter regulatory oversight due to their size and potential impact on the financial system.
The minimum Net Owned Fund (NOF) requirement for an NBFC is ₹10 crores. This is a mandatory prerequisite for obtaining a Certificate of Registration (CoR) from the RBI.
Non-compliance can result in a range of penalties including financial penalties, prosecution, suspension of business and in severe cases, the cancellation of the NBFC license.
While possible for simple cases, the complex and ever-changing nature of RBI regulations makes it highly risky to manage compliance without expert assistance. A small error or missed deadline can lead to significant financial and operational damage. Partnering with a professional firm like Praman Advisors ensures peace of mind and allows you to focus on your business's success.
