Non-Banking and Financial Regulations
Complementing the traditional Banking
India has different types of non-banking companies (NBFCs), which are more complementary to the traditional Banks than a competition and play an important role in fulfilling Government’s aim of financial inclusion. Non-banks bring diversity to the financial sector, spreads the risks and increases liquidity in the markets, promotes financial stability and brings efficiency to the financial sector.
The Reserve Bank of India acts as a regulator for the non-banks. RBI’s endeavor has been to streamline NBFC regulation and address the risks posed by them to financial stability, protect depositors’ and customers’ interests, address the regulatory arbitrage and help the sector grow in a healthy and efficient manner.
The challenge for the NBFC sector, as per the RBI, is to grow in a prudential manner while not stopping altogether on financial innovations. The key lies in having in place adequate risk management systems and procedures before entering into risky areas.
The Reserve Bank of India acts as a regulator for the non-banks. RBI’s endeavor has been to streamline NBFC regulation and address the risks posed by them to financial stability, protect depositors’ and customers’ interests, address the regulatory arbitrage and help the sector grow in a healthy and efficient manner.
The challenge for the NBFC sector, as per the RBI, is to grow in a prudential manner while not stopping altogether on financial innovations. The key lies in having in place adequate risk management systems and procedures before entering into risky areas.
Types of NBFCs
| Type | Business Activity | |
|---|---|---|
| NBFC – ICC | Investment and Credit Company | Investing in securities and lending for acquisition of assets |
| NBFC – P2P | Peer to Peer Lending | Facilitates borrowing/lending directly between individuals through an online platform |
| NBFC – AA | Accounts Aggregator | Facilitates sharing of individual’s data |
| NBFC – MFI | Micro-finance Institutions | Provides micro loans |
| NBFC-FACTOR | Factor | Provides finance on receivables with discount |
| NBFC - HFC | Housing Finance Company | Provides finance for purchase of home and improvements |
| MGC | Mortgage Guarantee Company | Protects other Financial Institutions from the losses occurring due loan defaults |
| NBFC – IDF | Infrastructure Development Finance | Providing long term debts for big Infra Projects |
| NBFC – IFC | Infrastructure Finance Company | Primarily provides finance to Infrastructure Projects |
| NBFC – ARC | Asset Reconstruction Company | Specialised in acquiring NPAs or stressed assets from Banks / Financial Institutions |
| NBFC – CIC | Core Investment Company | Primarily acquires and lends within the Group companies. Acts as Holding company. |
Our Approach
We understand and have domain knowledge about the non-banking sector. The firm has successfully applied and secured licenses for NBFCs in the past and we were instrumental in setting up their business operations. We actively engage with the promoters and the Management of the Company for the compliances requirements. The strategy adopted by the Firm is explained below:
Before Application for License
- Discussions and engaging with the promoters and understanding their business
- Advising on the Board and the Management Structures
- Formation of the entity with the Registrar of Companies
- Aligning internal compliances and governance framework
Application for License
- Drafting of Profiles of the Promoters / Directors and Management
- Drafting of the various policies
- Advisory on preparation of application for license
- Other allied documentation compliances and governance framework
Post License
- Advisory on post license compliances to commence the business operations
- Advisory on monthly, quarterly, half yearly and yearly compliances and submissions with RBI
- Securing approval for Change in the Management or significant shareholding
- Surrender of license
Frequently Asked Questions
Non-Banking and Financial Regulations
What types of entities can a foreign company set up in India?
You can establish a Private Limited Company, Public Limited Company, Wholly Owned Subsidiary, Joint Venture, Limited Liability Partnership (LLP), or even Companies for Charitable Purposes, depending on your business objectives and compliance requirements.
How do I decide the right structure for my business in India?
The choice depends on your industry, ownership preferences, taxation, compliance costs, and long-term goals. We spend significant time understanding your plans and advise the most suitable structure to optimize governance, cost, and operational efficiency.
What are the compliances required for starting a business in India?
Post incorporation, a company must comply with regulatory filings, taxation requirements, accounting standards, and corporate governance norms. This includes statutory registrations, maintenance of records, periodic returns, and other sector-specific approvals.
Can foreign investors freely invest in all Indian sectors?
Most sectors are open under the automatic FDI route, but certain industries require prior government approval. We help you assess whether your business falls under automatic or approval routes and guide you through approvals if required.
What are the key factors considered before entity formation?
We analyze promoter plans, industry nature, taxation aspects, compliance costs, and regulatory environment before advising on the form of entity to ensure long-term feasibility.
How does India support start-ups and entrepreneurs?
India has a vibrant start-up ecosystem with government support under the Start-up India Scheme. Entrepreneurs benefit from easier compliance, tax incentives, access to funding, incubators, accelerators, and strong investor interest.