India’s growing fintech and digital lending sector has opened significant opportunities for startups to enter regulated financial services. Startups engaged in digital lending, MSME finance, consumer credit, equipment financing, or similar activities may apply for registration as a Non-Banking Financial Company (NBFC) with the Reserve Bank of India. A newly incorporated startup is not automatically disqualified merely because it has no long operating history. However, it must satisfy the eligibility conditions prescribed by RBI and demonstrate that it is financially and operationally capable of conducting regulated financial activities.

Obtaining an NBFC licence involves much more than normal company incorporation. RBI examines factors such as capital adequacy, promoter and director background, ownership structure, source of funds, proposed financial activities, governance standards, compliance systems, and business viability. Under the current RBI framework, including the 2025 Scale Based Regulation Directions and 2026 amendments, startups should first assess whether their particular business model actually requires an RBI Certificate of Registration.

In this article, CA Manish Mishra talks about Can a Startup Obtain an NBFC Licence in India?

What is an NBFC?

A Non-Banking Financial Company is essentially a company engaged principally in specified financial activities such as lending, financing and investment. An NBFC may perform several functions similar to those performed by banks, particularly lending and investment activities. However, an NBFC is not a bank. RBI specifically explains that NBFCs cannot accept demand deposits, cannot issue cheques drawn on themselves as part of the payment and settlement system, and deposits with deposit-taking NBFCs are not covered by DICGC deposit insurance.

One of the most common forms of NBFC for lending businesses is the Investment and Credit Company (NBFC-ICC). RBI defines an ICC broadly as a company whose principal business involves asset finance, provision of finance through loans or advances, or acquisition of securities, unless it falls into another specialised NBFC category. Therefore, a startup intending to lend its own or borrowed funds commercially to consumers, SMEs or businesses may need to examine whether its model falls within the NBFC regulatory structure.

Can a Newly Incorporated Startup Apply for NBFC Registration?

Yes, a newly incorporated startup can apply for NBFC registration in India, provided it satisfies the eligibility and regulatory requirements prescribed by the Reserve Bank of India. RBI does not generally require every applicant to complete a specific number of years in business before applying. Promoters may therefore incorporate a new company specifically for undertaking NBFC activities, structure its objects accordingly, bring in the required capital, and prepare the necessary governance, compliance, and operational framework before submitting the application.

For instance, founders planning to start a digital lending business can incorporate a company under the Companies Act, 2013, align its object clause with the proposed financial activity, arrange the prescribed Net Owned Fund, appoint suitable directors, and prepare a detailed business plan. However, being a startup, DPIIT-recognised entity, venture-funded company, or bootstrapped business does not provide any automatic exemption from RBI regulations. The applicant must independently satisfy the conditions applicable to its proposed NBFC category.

Minimum Capital Required for a Startup NBFC

One of the biggest entry barriers for startups seeking a conventional NBFC registration is the requirement relating to Net Owned Fund (NOF). Under the current RBI framework, a company seeking fresh NBFC registration generally needs a minimum Net Owned Fund of:

RBI states that NBFCs seeking registration are required to have ₹10 crore NOF ab initio. The ₹10 crore requirement became applicable for new applicants with effect from October 1, 2022. This means a founder cannot ordinarily establish a conventional lending NBFC with only ₹10 lakh, ₹50 lakh or ₹2 crore of capital and then expect to raise the balance after obtaining registration.

The company should meet the applicable NOF requirement when seeking registration.

However, specialised NBFC categories may have different thresholds. RBI currently specifies, among others:

• NBFC-Infrastructure Finance Company: ₹300 crore

• Infrastructure Debt Fund-NBFC: ₹300 crore

• Mortgage Guarantee Company: ₹100 crore

• Housing Finance Company: ₹20 crore

• NBFC-Account Aggregator: ₹2 crore

• NBFC-Peer-to-Peer Lending Platform: ₹2 crore

Therefore, the required capital depends heavily on the exact business model proposed by the startup.

Understanding Net Owned Fund

Founders should not assume that depositing ₹10 crore into a company's bank account automatically means that the company has the required Net Owned Fund. NOF is a regulatory financial concept and must be calculated in accordance with the RBI Act and applicable RBI directions. Certain items, investments, accumulated losses and other adjustments can affect the final amount recognised as Net Owned Fund. Accordingly, the company's capital structure should ideally be planned before the NBFC application is filed rather than simply raising funds and restructuring later.

Does Every Fintech Startup Need an NBFC Licence?

No, every fintech startup does not require an NBFC licence. Registration is generally relevant when a company is carrying on financial activities as its principal business and is not covered by an exemption or another regulatory framework. RBI commonly applies the 50-50 test to assess this. Broadly, financial activity is treated as the principal business when more than 50% of the company’s total assets are financial assets and more than 50% of its gross income is earned from such financial assets. Both conditions are considered together.

A fintech startup that only provides technology, software, analytics, payment support, or other services to banks and NBFCs does not automatically become an NBFC. The position is different where the startup itself lends money, holds financial assets, and earns substantial income from lending or financing activities. Therefore, founders should carefully examine the company’s actual business model, source of income, asset composition, and regulatory structure before deciding whether RBI registration is required.

Important 2026 Change for New Startups – Unregistered Type I NBFCs

A particularly important regulatory development took place in April 2026.

RBI introduced an exemption for certain companies categorised as “Unregistered Type I NBFCs.”

Under the amended framework, companies that:

• do not avail public funds;

• do not have any customer interface;

• have an asset size below ₹1,000 crore; and

• satisfy the principal business criteria,

may be exempt from the requirement of registration under Section 45-IA of the RBI Act.

RBI has specifically clarified that new companies that intend to operate without public funds and without customer interface are not required to seek NBFC registration until they reach an asset size of ₹1,000 crore. However, the exemption is narrow. If a startup intends to access public funds or interact with customers, it must obtain registration before doing so, irrespective of its asset size. This distinction is especially important when founders are deciding whether an investment-holding structure requires an NBFC registration.

What is “Customer Interface”?

RBI interprets customer interface broadly. It includes interaction with customers while carrying on NBFC business, including relationships created through lending or other financial products.

RBI has clarified that commercial lending, guarantees, inter-corporate deposits and similar transactions with group companies, shareholders or directors can also constitute customer interface in appropriate circumstances. Therefore, a startup cannot simply call itself an investment company and rely on the Type I exemption while commercially lending money to customers.

What are “Public Funds”?

Public funds are broader than public deposits.

RBI explains that public funds can include amounts raised through sources such as:

• bank finance;

• inter-corporate deposits;

• commercial paper;

• debentures; and

• other outside funding sources.

Importantly, under the new Type I, RBI has clarified that even loans received from directors or shareholders are treated as public funds for this purpose because they represent outside liabilities. This makes funding structure particularly important when designing a startup's NBFC model.

Key Eligibility Requirements for a Startup NBFC

A startup planning to obtain NBFC registration should generally address the following fundamental requirements.

Incorporation as a Company

The applicant must be incorporated as a company under the Companies Act. An ordinary partnership firm or LLP cannot simply apply for a conventional NBFC Certificate of Registration under Section 45-IA in the same manner as a company. RBI's registration requirements expressly refer to an applicant being a company incorporated under the applicable Companies Act.

Correct Business Objects

The company's constitutional documents should appropriately reflect the proposed financial activity. If the company has originally been incorporated as an IT, trading or manufacturing company and later proposes to become an NBFC, its objects and corporate structure should be reviewed before making the RBI application.

Required Net Owned Fund

For a conventional new NBFC applicant, the current minimum is generally ₹10 crore, subject to different thresholds applicable to specialised NBFC categories.

Suitable Promoters and Management

Financial businesses handle customer funds, credit decisions and sensitive financial information. RBI therefore exercises regulatory due diligence in relation to NBFC applicants. RBI has historically emphasised due diligence relating to directors, including their qualifications, technical expertise, track record and integrity. For startups, this means the quality and credibility of the promoter and management team can be an important part of the application.

Viable Business Plan

The application should clearly explain what the company intends to do after obtaining registration. The business model should address issues such as:

• target borrowers;

• loan products;

• sourcing of customers;

• underwriting mechanism;

• credit assessment;

• proposed geographical operations;

• technology infrastructure;

• collection mechanism;

• risk management;

• funding model;

• projected balance sheet;

• expected profitability; and

• compliance structure.

A regulatory application should not merely say that the company intends to provide “financial services.” The proposed activity should be clear and commercially coherent.

Regulatory and Compliance Infrastructure

Obtaining the Certificate of Registration is only the beginning. RBI's regulatory framework for NBFCs includes requirements relating to areas such as prudential norms, provisioning, governance, disclosures, KYC/AML, customer protection and fair practices. A startup should therefore budget for regulatory compliance from the beginning instead of treating compliance as something that can be established after the business scales.

Process for Startup NBFC Registration

Step 1: Decide the Exact Financial Business Model

The founders should first decide whether the company will provide consumer loans, MSME loans, asset financing, digital credit, investments, P2P services, account aggregation, housing finance or some other financial service. This determines the applicable regulatory category.

Step 2: Determine Whether RBI Registration is Actually Required

The proposed activity should be tested against the principal business criteria and the relevant RBI exemptions. The 2026 Type I exemption should also be considered where the company genuinely proposes to operate entirely without public funds and customer interface.

Step 3: Incorporate or Restructure the Company

The applicant should have an appropriate company structure, authorised capital, shareholding pattern and objects supporting the proposed activity.

Step 4: Bring in the Required Capital

For a standard fresh NBFC registration, the company should generally achieve ₹10 crore Net Owned Fund before applying. The source and structure of promoter capital should be transparent and properly documented.

Step 5: Prepare the RBI Application Package

The company should prepare the prescribed application together with supporting documentation, corporate records, financial information, promoter/director information and business-plan-related documents. RBI has clarified that its document checklist is indicative rather than exhaustive and that additional information may be requested where necessary to determine the applicant's eligibility.

Step 6: Apply Through RBI's PRAVAAH Portal

Under the current RBI procedure, an applicant company seeking NBFC registration is required to submit its application through RBI's PRAVAAH portal, together with the prescribed supporting documents.

Step 7: RBI Scrutiny

RBI reviews the application and may raise queries or ask for additional information or documents. The application should therefore remain internally consistent. For example, the projected loan portfolio, capital structure, proposed technology model and management capability should support the business model represented to RBI.

Step 8: Grant of Certificate of Registration

If RBI is satisfied that the applicant satisfies the statutory and regulatory conditions, it may issue the relevant Certificate of Registration. The company should undertake regulated NBFC activities only in accordance with the conditions of its registration.

Can the Startup Start Lending While the NBFC Application is Pending?

A startup should not assume that merely filing an NBFC application gives it permission to operate as an NBFC. Section 45-IA regulates commencement or carrying on of the business of a non-banking financial institution without the required registration, where registration is applicable.

RBI expressly warns that companies conducting lending, investment or deposit-related financial activity as their principal business without obtaining the required Certificate of Registration may face regulatory action, including penalties, fines and prosecution. Therefore, the operating model during the application period must be structured carefully.

Can a Startup Accept Public Deposits After Getting an NBFC Licence?

Not automatically. Obtaining an NBFC Certificate of Registration does not mean the company can freely accept deposits from the public. RBI states that only NBFCs specifically authorised to accept public deposits may do so. Non-deposit-taking NBFCs cannot accept public deposits merely because they hold an NBFC registration. Startups should therefore avoid advertising investment or deposit schemes unless the regulatory position has been carefully verified.

Challenges Startups Face in Obtaining NBFC Registration

The first major challenge is capital. The ₹10 crore entry-level NOF requirement for conventional new NBFC applicants makes direct NBFC registration substantially more capital intensive than establishing an ordinary fintech company. The second challenge is regulatory readiness. RBI registration is not simply a company-registration exercise. The applicant must demonstrate that it has considered governance, risk management, customer protection and compliance.

The third challenge is the business model itself. Many startup applications become complicated because founders initially design a technology business but later introduce lending, wallet, investment or credit products without analysing whether additional regulatory permissions are required. The fourth challenge is the source of funding. A startup may raise capital from founders, angel investors, venture capital funds or institutional investors, but the funding structure must be legally and regulatorily appropriate.

NBFC Registration vs Partnering With an Existing NBFC

Not every fintech startup needs to establish its own NBFC from day one. For some startups, an alternative model is to operate as a technology or service platform while partnering with an existing RBI-regulated bank or NBFC. The regulated entity remains responsible for the lending activity, subject to applicable RBI outsourcing and digital lending regulations, while the fintech provides technology, customer acquisition, servicing or related support within the permitted regulatory context.

This approach can significantly reduce the initial capital requirement, although it also means the startup does not independently operate as the lender. As the business grows, promoters may later evaluate whether obtaining their own NBFC registration is commercially justified.

Does DPIIT Startup Recognition Make NBFC Registration Easier?

DPIIT recognition can provide eligible startups with benefits under the Startup India ecosystem, but it does not replace the regulatory approval required for carrying on an NBFC business. The RBI Act and RBI directions govern whether NBFC registration is required. Therefore:

Startup India Registration ≠ NBFC Registration

A DPIIT-recognised fintech still requires the applicable RBI authorisation if its proposed activities fall within the NBFC regulatory structure.

Is NBFC Registration Worth It for a Startup?

For a startup that wants to build a serious lending institution, an NBFC licence can provide considerable strategic value. Operating through its own regulated NBFC can allow the business to develop its own credit products, underwriting framework, lending portfolio and long-term financial-services brand.

However, founders should consider whether the scale of the business justifies the capital and compliance obligations associated with becoming an RBI-regulated entity. A startup expecting only a small lending portfolio may find a partnership model more commercially practical initially. A founder planning to create a substantial digital lender, MSME financier or specialised financial institution may find direct NBFC registration more appropriate.

Recent Regulatory Position Startups Should Know

The introduction of the Unregistered Type I NBFC outline in April 2026 has created an important distinction for new financial companies. A company operating entirely from its own funds, having no customer interface and maintaining an asset size below ₹1,000 crore may qualify for exemption from Section 45-IA registration. However, once the company proposes to access public funds or have customer interface, RBI registration as the appropriate category must be obtained beforehand.

For actual lending startups dealing with external borrowers, the customer-interface condition will generally make this exemption unsuitable. Accordingly, founders should not interpret the 2026 exemption as a general relaxation allowing fintech companies to undertake unlicensed lending.

Conclusion

Yes, a startup can obtain an NBFC licence in India, provided it meets the eligibility conditions prescribed by the Reserve Bank of India. A newly incorporated company can apply for registration if it has the required capital, suitable ownership and management structure, a clear business model, and an adequate compliance framework. For a conventional new NBFC applicant, one of the key requirements is generally a minimum Net Owned Fund of ₹10 crore, along with incorporation under the Companies Act and submission of the application through RBI’s PRAVAAH portal.

However, founders should first assess whether their business model actually requires NBFC registration. Factors such as the principal business test, customer interface, source of funds, and nature of financial activity can significantly affect the regulatory position. Therefore, startups entering lending or financial services should carefully plan their capital structure, regulatory category, operations, and compliance system before proceeding with an NBFC application.

Frequently Asked Questions

Q1. Can a newly incorporated company apply for an NBFC licence?

Ans. Yes. A newly incorporated company can seek NBFC registration if it satisfies the applicable RBI conditions. RBI requires the applicant to be a company incorporated under the Companies Act and to meet the applicable Net Owned Fund and regulatory requirements.

Q2. What is the minimum capital required for a new NBFC?

Ans. For a conventional fresh NBFC applicant, the minimum Net Owned Fund is generally ₹10 crore. Specialised categories have different requirements; for example, NBFC-P2P and NBFC-AA presently have ₹2 crore requirements.

Q3. Can an LLP obtain NBFC registration?

Ans. The conventional NBFC registration requirement under Section 45-IA applies to a company, and RBI's eligibility criteria for registration specifically require incorporation under the Companies Act. Therefore, promoters generally establish a company for an RBI-registered NBFC business.

Q4. Does every digital lending startup need an NBFC licence?

Ans. Not necessarily. Whether registration is required depends on who is actually lending, whose balance sheet is used, whether financial activity constitutes the company's principal business and how the business model is structured. A pure technology service provider may have a different regulatory position from a company lending its own funds.

Q5. Can a startup lend money before obtaining NBFC registration?

Ans. Where the company is required to obtain registration because it carries on non-banking financial activity as its principal business, it should not commence such regulated activity without the required Certificate of Registration. RBI can take penal action against companies carrying on regulated NBFC activity without registration.

Q6. Can a registered NBFC accept deposits from the public?

Ans. Not automatically. Only NBFCs specifically authorised by RBI to accept public deposits may do so. Holding an ordinary non-deposit-taking NBFC registration does not permit unrestricted acceptance of public deposits.

Q7. Where is the NBFC application filed?

Ans. RBI currently requires applicant companies to submit NBFC registration applications through its PRAVAAH portal along with the prescribed supporting documents.

Q8. Can founders use borrowed money to meet the NBFC capital requirement?

Ans. The capital and Net Owned Fund structure must satisfy RBI requirements, and its source should be capable of regulatory scrutiny. Merely transferring borrowed money into the company does not necessarily establish the required genuine Net Owned Fund. The capital structure should therefore be planned carefully before filing.

Q9. Does Startup India or DPIIT recognition reduce the ₹10 crore requirement?

Ans. No general RBI exemption from the NBFC NOF requirement arises merely because a company is recognised as a startup. If the startup proposes to operate as a conventional NBFC requiring registration, the applicable RBI capital requirement must be satisfied.

Q10. What changed for startups under RBI rules in 2026?

Ans. RBI introduced the Unregistered Type I NBFC framework in April 2026. New companies operating without public funds and without customer interface may remain unregistered while their asset size is below ₹1,000 crore. If they intend to access public funds or have customer interface, they must seek RBI registration before doing so.