NBFC Registration and Takeover – Step by Step Process in India

After it comes to loaning business you can have products like Secure Leaky or Micro Loan or maybe any fintech product. So in India, we have a license called NBFC Registration. Icc license. Icc means Investment Credit Company. So earlier this license was known as Loan Company and we have other categories called AFC Asset Finance Company and Investment Company.

So sometime in 2019 at the beginning of fifteen RBI has merged all three categories into a loan company. So if you are willing to start a loan business you need to take only one license which is a Loan Company. And with the loan company, you can do all business activities like secure, Unsecured, working capital, business loan, everything. So this license has multipurpose features. So we’ll discuss this license.

How new NBC resistance works in India

So now you have two ways to avoid this license. One is where you apply for a new NBFC license and the second is where you will apply for an NBFC ticket. So at the start of our videos, we’ll talk about the new NBFC Registration. How new NBC resistance works in India.

So new NBFC means you are going to apply fresh. Fresh means it belongs to you. You are the first owner and you are the first shareholder of the NBFC. So the process starts from set up your Indian subsidiary company. You will set up a Union, subsidiary company, and in this subsidiary, you can own 99.9% or maybe 99% shares as of the foreign company, maybe in Singapore, Hong Kong, the US, or anywhere, you prefer.

So you need to register a new company.

So as you know that in India there is 100% FDI in the lending business. So nothing needs to be worried about. So let’s talk about the further stage. So first of all you have identified that mode of working. So you need to register a new company.

I always give preference to registering in a state or in a city where there is a requirement for an NBFC Certificate. So you need to do a proper analysis in which city you should register your NBFC because it will highly impact your approval process and it depends on where you are going to register and how soon you can register. The second stage is that you need to finalize your team. So your team and your Indian directors must have banking experience and legal experience. If you have a fintech product you should have a team who understands technology.

This is a basic minimum requirement from RBI as part of the experience that this would be the team that can successfully deliver the loan product. And the loan process mitigates the risk of your business. So this is required once you finalize a team and company is registered, you need to open a bank account. And in the bank account, you are required to put at least RS20 million as a fixed deposit along with a 20 million fixed deposit. You will also require to have some additional working capital funds which the company may require for their operating expenses like rental government fees or whatever.

Read Our Blog: NBFC Registration Process

This needs to be arranged. Now coming to the team you have done now about the business plan. So what we need to do is we need to create a business plan. A business plan would not be a normal business plan. It would be like you are going to raise funds.

So it will start from your executive summary to your distill plan. And plans would be real basis on the market trend basis on the analysis of the current market industry range. So this only you need to take care and your business plan would include your lead origination system. This is called Los. That’s where you will generate leads whether it’s going to be online or offline and how this is going to work.

Loan Management System You Need To Explain About Your Technology

Then it comes to the loan management system. So in a loan management system, you need to explain your technology. That is what technology stack you have or you are going to build what all risk KPI or KPI you have or you are going to build. So all such explanations will be part of the business plan. If you are saying that okay I’m going to generate my lead from social media then you need to give a complete digital plan.

Application Valid

That’s how it’s going to work. If you’re saying okay I will have an offline lead generation module. Then you have to give the state-wide DSA plan what sales executive you will have and then things will work out. After you have done the business plan there will be the online submission of the application to RBI and then you need to submit a physical document to RBI and then RBI will take maybe 120 working days sometime lesser so you can expect a quick reply from RBI. So this is all tax and if you are valid your application is valid.

Risk Factor

You are genuine. You have a good background. You can expect that license will come in 120 working days. The timeline can be less or more than this. Now let’s talk about what’s the risk factor.

Why a large number of negative has been elected because of most of the consultants or charter content or professionals. They are not going to draft the application which is required by the RBI.

Notification of Documents

So if you see the notification has just a tentative list of documents. So you need to go beyond the notification. You need to prove it’s not complicated. You are applying for an MBS license so experience with handling of process is very important along with the prior working experience, understanding of the lending regulation, and all sorts of things you should keep in mind along with the team. So your team should be very clean.

The conduct of the team must be clear and they should have banking or finance or legal experience maybe altogether so that it depends on the application and if all goes well everything moves forward. You can move on then comes to the quality of capital. So what is the quality of capital? Quality of capital means whatever capital you are investing in India, it should be a taxpayer. It should not be done through any illegal channel or illegal means.

You have to prove the end beneficiary of capital. If you are an incorporated company in India and let’s say your investment company is in Singapore or United States or Hong Kong, you have to prove the person who is the end beneficiary of this holding company. This is a very important moral conduct background and everything is important as equal of your Indian shareholders and director. Similarly, it’s important for the holding company. Let’s talk about the other option which we would like to discuss is in these take over. So this is widely popular.

Some people have misconceptions that you can take over is usually no, it’s not easy. Both have the same timeline. I can say I think a takeover takes more time than the new NBA decision because a takeover has double work. Likewise, you need to deal with sales, you need a little bit of acquired. So I will discuss in detail how you can process the NBF takeover.

License Requirement for NBFC Takeover

So NBFC takeover is a very old method of acquiring a lending license in India. When RBA was not issuing so many numbers of licenses like in 2013 to 16, so many people preferred many entrepreneurs preferred to OK, I should acquire a VFC license from the existing there because we believe that close to 9000 licenses. We have an active license in India. Hardly 1000 or maybe 1200 license is doing well. The rest of them are not doing well, just fulfilling the minimum requirement of the license.

So we’ll talk about the process of taking over. What is the process of taking over? The first process is you need to hire a consultant or professionals who can help you with the identification of the target. So target, you have to identify. You have to identify a state or city that you are willing to take over because NBC comes under the RBI.

It’s a central government. So if you have a license in one city, you can operate anywhere in India. So once you’re done with the target you will sign MoU the details contain everything about the discussion which you had with the target. So you can bring all the documents or everything on paper. Then comes TD.