NBFC Registration Fees in India: Reasons why it is so high

One of the biggest ordeals for every NBFC owner is the NBFC registration fees. Undoubtedly, the NBFC fee is quite high, and hence, everybody intending to register their business as NBFC has to pay the required amount. Now, you might be thinking, what makes it so expensive? The answer is- the complicated registration process and strict documentation.

Through this blog, we have focused on digging out several reasons which are the result of high NBFC Registration fees. Since the process of obtaining an NBFC license is highly critical, we advise you to proceed step by step so that you can completely understand the primary intent of this blog.

What are the NBFC Registration Fees for obtaining NBFC license?

An approximate of Rs. 3, 50,000 as a government fee is required to register a company as NBFC with NOF of Rs. 2 crores. Besides, you will require to pay professional fees to NBFC consultant, in case you are securing expert’s help and advice.

Therefore, the total capital you will require to pay for an NBFC could amount you to Rs. 15-16 lakhs or above. However, we at Swarit Advisors will help you to obtain NBFC at quite nominal charges.

Why is NBFC License Fees so high?

It’s one of the most popular questions that people have about NBFC and it is quite apparent. NBFC registration fee isn’t just the fee required for NBFC, but it includes everything from company incorporation to annual compliance of NBFC. There are several things that need to be done while enrolling your business for NBFC. As a result, the NBFC fees are extremely high.

Let’s discuss the reasons why fees for obtaining NBFC license are quite high. They are as follows:

Net Owned Fund (NOF)

Although NOF doesn’t count in the NBFC registration fees, one can consider the NOF as a part of registration. It is so because net owned find is the very first requirement for being eligible for NBFC. Additionally, it’s the first capital which makes the NBFC appear so expensive. However, make sure you don’t include the NOF in the registration fee.

Company Incorporation with MCA

Company incorporation in itself is a cumbersome task. Along with the application fee, you will require to pay the prescribed fee for the following as well:

MCA’s fee for filing the application;

SPICe filing;

RUN (Reserve Unique Name) application;

DIN (Director Identification Number) for every director;

DSC (Digital Signature Certificate) of every director;

MOA (Memorandum of Association) and AOA (Articles of Association).

Required technical equipment

Since you are starting such big incorporation, you will definitely require a few essential software. In fact, it’s one of the mandatory requirements for getting NBFC registration in India. Every company incorporating as an NBFC must be technically equipped and possess all the necessary NBFC software. Under the circumstance, you lack the technical equipment for NBFC company, then RBI can reject your application for registration. Therefore, for NBFC license, you must have the prescribed software which will again cost you in lakhs.

Government NBFC registration fees

As discussed, the government fee for NBFC is Rs. 3, 50, 000 which is unquestionably high. Plus, because it’s the government fees, you can’t negotiate it. As a result, you have to pay the full amount. It’s one of the biggest reasons why the NBFC fee is so high.

Business Plan

A business plan is another aspect contributing to high fees for registering an NBFC. Without a business plan, no company can even start its work. It’s the layout or better say, the road map of any business. A business plan consists of Business’s objective, executive summary, business model, revenue projection, and more. Besides, it consists of next five plans of the company. Therefore, a business plan is NBFC’s one of the vital requirements.

Now, because it’s so much required and includes the most crucial parts of the business, experts charge a nice fee for the same. As a result, fees for NBFC are extremely high.

Documentation

Most of the NBFC’s application is rejected because of improper or inappropriate and partial documentation. Documentation plays a major role in both the NBFC registration process as well as contributing a good hike in the registration fee. Documents required for NBFC are as follows:

KYC of all the directors and shareholders

Net worth certificate

Clean banker report

Credit report of all the shareholders and directors

Education proof

At least one director’s profile with more than 10 years of experience in the financial sector

CA certificate

FDI report, if any

Business plan

System and IT policy, etc.

Expert’s fee

An expert fee is what professionals require for all the above processes. The expert will help you with the documentation process, provide you with a strong and well intact business plan, get your company registered, give you MOA and AOA of the company, etc. Apart from this, experts will also give you advice on how to carry on the business. Further, they keep in touch with RBI and acquaint you with all the required information for running an NBFC successfully. All this costs a lot. Hence, the expert’s fee amount from Rs. 5 lakh to Rs. 10 lakh, excluding government fees. If everything is accurate and satisfies RBI’s eligibility criteria, then the expert will get you the NBFC license within 84 to 90 working days.

Besides the above-mentioned, NBFC compliance also plays a critical role in contributing to the extremely high NBFC registration fees. In case, somebody fails to comply with compliance of NBFC within the due time, the company would be subject to hefty penalty or could even lead to company closure.

Now that you have known how much money you will require for obtaining NBFC license, let us discuss in brief about the NBFC formation.

How an NBFC is formed?

NBFC stands for Non-Banking Financial Institution. Typically, it’s a kind of company which deals with the principal business of loans and advances, hire-purchase, acquisition of stocks or shares, chit funds, insurance business, leasing, etc. In short, it is a financial institution that acts almost like a bank but is slightly different in a few aspects. For instance, NBFCs cannot accept demand deposits, nor it can issue cheques drawn in its favour.

Therefore, according to the RBI Act, 1934, if you are engaged in the principal business of aforesaid financial activities, then you must first obtain an NBFC license from RBI.

According to section 45 I (a) of the RBI Act, 1934, every company willing to register itself as NBFC should first comply with the following requirements:

The company must be registered as a Private Limited Company or Public Company under Section 3 of the Companies Act, 2013 .

. The applicant must possess the net owned fund (NOF) or fixed deposit of Rs. 2 crores in the account.

Apart from this, the company is supposed to provide the RBI with a few essential documents such as KYC and credit report of all the directors and shareholders, Certificate of Incorporation, Business plan, etc.

Now, if you satisfy the above-mentioned conditions, you can proceed to apply for NBFC license. For Register NBFC with RBI, go to RBI’s COSMOS [1] website, where you need to sign in and submit the application for NBFC. But before that, you must ensure that you have registered your company with MCA (Ministry of Corporate Affairs) [2] .

Expert’s advice

The NBFC registration fees may surely seem high to anybody, but to ensure your application don’t get rejected and you get your NBFC license successfully without much hassle, you should take an expert’s help. As we have already stated above, Swarit Advisors helps its client to get NBFC at quite nominal charges. Further, our experts will guide you throughout the whole process and will assist you whenever and wherever necessary.

Once you have obtained the NBFC license, we advise you to follow up with the NBFC compliances strictly or you may have to face the negative consequences of it. Again, if you find it difficult to file the returns of NBFC, get in touch with the experts of Swarit Advisors.