An NBFC or a Non-Banking Financial Company, is established under the Companies Act in India. It is
involved in the business of providing loans and advances to the public. An NBFC company may acquire shares, stocks, bonds, debentures, and other securities from the government or the local authorities. It can be engaged in hire-purchase, leasing, insurance business, chit fund business. But it should not be involved in agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services or sale/purchase/construction of immovable property.
An NBFC Company accepts deposits, in lump sum or installments, in different plans/schemes/arrangement.

NBFCs provide loans and make investments. This characteristic is the same as that of banks.
However, there are some differences:
1. NBFCs cannot accept deposits payable on demand,
2. They are not part of the payment and settlement system and cannot issue cheques drawn on itself,
3. The deposit insurance facility of the “Deposit Insurance and Credit Guarantee Corporation” is not available to the investors of NBFCs.

• Certificate of Incorporation of the Company.
• MoA and AoA.
• Administrative Documents of the Company.
• Address proof of the Company.
• Detailed information about Directors or Partners of the Company.
• Well-audited accounts of the Company since its formations or for at least the past 3-consecutive years.
• Board Resolution approving the creation of NBFC.
• Bank Account that holds the paid-up equity share capital of minimum Rs. 2 Crore.
• Latest KYC.
• Net worth certificate.
• Clean banker’s report.
• Other relevant documents on request.

No. Merchant Banking Companies, Stock Exchanges, Housing Finance Companies, Venture Capital
Fund Companies, Stock-broking/Sub-broking Companies, Nidhi Companies, Insurance Companies, and Chit Fund Companies are NBFCs and they do not need to be registered with RBI but they are subject to certain conditions.
They are regulated by other regulators.

RBI has the authority to register, lay down policy & provisions, issue directions, regulate,
supervise, inspect, and exercise surveillance over NBFCs meeting the 50-50 criteria of principal business. It can also penalize NBFCs for infringing the provisions of the RBI Act or directions/orders issued under it. The penal action can also be cancelation of the CoR or prohibiting them from accepting deposits and alienating their assets or filing a winding-up petition.

If businesses whose principal activity is lending, making investments or accepting deposits, are required to be registered with RBI as NBFCs, and if they are found without NBFC license, RBI can impose penalty or fine on them. They can even
be indicted in a court of law. Members from the general public are invited to report such firms to the nearest Regional
Office of RBI. And appropriate action will be taken for violating the provisions of the RBI Act, 1934.

The provisions are as under:
a) The norms are the Fair Practices Code, KYC, etc.
b) Those with a customer interface are subject to these codes, if they are not accessing public funds.
c) If public funds are accessed, NBFCs will be subjected to certain prudential regulations but not conduct of business regulations, if no customer interface is there.
d) When public funds are accepted and the customer interface also exists, those companies are subject to both the limited prudential regulations and the conduct of business regulations.

Public Fund means public deposits, bank finance, inter-corporate deposits, and all funds
received, whether directly or indirectly, from outside sources. It could be funds raised by issuing Commercial Papers etc.