Starting a lending, investment, microfinance or financial-technology business in India requires more than incorporating a company and arranging capital. When a company proposes to carry on lending, financing, acquisition of securities or another non-banking financial activity as its principal business, it may be required to obtain a Certificate of Registration from the Reserve Bank of India. NBFC registration is not merely a procedural licence. The RBI examines the company’s financial strength, ownership, management capability, source of capital, business model, governance structure, risk controls and ability to protect customers.

A founder must therefore design the business in accordance with the regulatory framework before accepting customers, disbursing loans or raising public funds. The regulatory position also changed in 2026 for companies that do not use public funds and do not have any customer interface. Consequently, founders should first determine whether RBI registration is compulsory for their proposed model before preparing an application.

In this article, CA Manish Mishra talks about NBFC Registration Requirements Every Founder Must Know.

What Is an NBFC?

A Non-Banking Financial Company is a company incorporated under the Companies Act that carries on the business of loans and advances, acquisition of shares, stocks, bonds, debentures, securities, leasing, hire purchase or another financial activity specified under the Reserve Bank of India Act, 1934.

A company does not become an NBFC merely because it has granted an occasional loan or made certain investments. Its financial activities must constitute its principal business. The RBI applies the Principal Business Criteria, commonly known as the 50-50 test, to determine whether the company is predominantly engaged in financial business.

How Is an NBFC Different from a Bank?

An NBFC may undertake lending, financing, investment and other permitted financial activities, but it does not enjoy all the powers available to a bank.

• Acceptance of Demand Deposits: An NBFC cannot accept demand deposits like current-account or savings-account deposits. Only NBFCs holding a specific deposit-taking authorisation from the RBI may accept public deposits, subject to prescribed restrictions.

• Payment and Settlement Facilities: An NBFC does not form part of the payment and settlement system in the same manner as a bank and cannot issue cheques drawn on itself.

• Deposit Insurance: Deposits placed with an eligible deposit-taking NBFC are not protected by the Deposit Insurance and Credit Guarantee Corporation. Therefore, even a deposit-taking NBFC cannot represent its deposits as having the same insurance protection as bank deposits.

When Is RBI Registration Required?

The Principal Business or 50-50 Test

A company is treated as carrying on financial activity as its principal business when both parts of the 50-50 test are satisfied. Under the first part, financial assets should constitute more than 50% of the company’s total assets. Under the second part, income from financial assets should constitute more than 50% of the company’s gross income. Both conditions must ordinarily be satisfied for the company to meet the Principal Business Criteria.

For example, where a company’s principal assets consist of loans and investments and most of its revenue is interest income, processing charges or investment income, it may be regarded as an NBFC. However, a manufacturing or service company that occasionally grants an inter-corporate loan may not become an NBFC if financial assets and financial income do not cross the prescribed thresholds.

Registration Before Commencement of Business

Section 45-IA of the RBI Act generally prohibits a company from commencing or carrying on the business of a non-banking financial institution without obtaining an RBI Certificate of Registration and maintaining the applicable Net Owned Fund.

A founder should not disburse loans, onboard borrowers or publicly claim that the company is an RBI-registered NBFC while the application is pending. Conducting financial business without the required registration may result in monetary penalties, prosecution and other regulatory action.

Important 2026 Exemption for Unregistered Type I NBFCs

Meaning of an Unregistered Type I NBFC

From July 1, 2026, an NBFC that does not avail public funds, does not have customer interface and has an asset size below ₹1,000 crore may qualify as an Unregistered Type I NBFC. Such a company may be exempt from the registration requirement under Section 45-IA and the statutory reserve requirement under Section 45-IC, provided that operating without public funds and customer interface is a conscious and long-term business model.

Conditions Attached to the Exemption

The company must not access public funds directly or indirectly and must not interact with customers while carrying on its financial business. It must pass an annual Board resolution at the beginning of the financial year confirming that it will not access public funds or have customer interface during that year.

The company must also disclose in the notes to its financial statements that it is an Unregistered Type I NBFC and state the position regarding public funds and customer interface. Its statutory auditor is expected to report violations of the conditions attached to the exemption.

Asset Size Must Remain Below ₹1,000 Crore

The exemption is available only when the company’s asset size is below ₹1,000 crore according to its latest audited Balance Sheet. Where multiple Unregistered Type I NBFCs exist in the same group, their asset sizes are aggregated. If the combined asset size of such group entities reaches ₹1,000 crore or more, the concerned companies are required to obtain registration as Type I NBFCs.

Registration Is Required for Customer-Facing Models

A company intending to provide loans to retail customers, businesses or other borrowers has customer interface. Similarly, a company intending to obtain bank finance, issue commercial papers or debentures, receive inter-corporate deposits or otherwise access external public funds may not qualify for the exemption. Such a company must obtain registration as a Type II NBFC before undertaking the proposed business.

Major Types of NBFC Registration

The correct NBFC category must be selected according to the proposed activity. A founder should not apply for a general lending registration where the business model falls within a specialised regulatory category.

Investment and Credit Company

An Investment and Credit Company, or NBFC-ICC, is the commonly selected category for businesses proposing to provide loans, advances, asset finance or investment services without falling within another specialised NBFC category. An NBFC-ICC may undertake lending or investment activities subject to its RBI authorisation, Board-approved policies and the prudential requirements applicable to its regulatory layer.

NBFC-Micro Finance Institution

An NBFC-MFI is a non-deposit-taking NBFC that has at least 75% of its total assets deployed in microfinance loans. A microfinance loan is a collateral-free loan given to a household having annual household income up to ₹3 lakh. Founders planning a micro-lending business must prepare systems for household-income assessment, borrower indebtedness checks, repayment flexibility and customer protection.

NBFC-Factor

An NBFC-Factor is engaged in the principal business of factoring, which generally involves financing against receivables. For classification as an NBFC-Factor, financial assets relating to factoring should ordinarily constitute at least 50% of total assets, and income from factoring should constitute at least 50% of gross income.

Housing Finance Company

A Housing Finance Company is an NBFC whose financial assets in the business of providing housing finance constitute at least 60% of its total assets after the applicable adjustments. Additionally, not less than 50% of total assets should ordinarily be deployed in housing finance for individuals within the prescribed categories. An HFC applicant must satisfy the separate requirements contained in the RBI directions governing housing finance companies.

Infrastructure Finance Company

An Infrastructure Finance Company is an NBFC that deploys at least 75% of its total assets towards infrastructure lending. This category has a substantially higher capital requirement because infrastructure financing generally involves large exposures, long repayment periods and specialised risk-management requirements.

Infrastructure Debt Fund-NBFC

An IDF-NBFC is permitted to refinance qualifying post-commercial-operation infrastructure projects and finance specified infrastructure arrangements. A founder considering this category must evaluate the separate eligibility, capital, sponsor, borrowing and asset-related conditions applicable to infrastructure debt funds.

Core Investment Company

A Core Investment Company primarily holds investments in group companies. A registered CIC ordinarily has at least 90% of its net assets invested in equity, preference shares, debt or loans in group companies, along with other prescribed conditions. A CIC having an asset size of ₹100 crore or more and accessing public funds is generally required to obtain RBI registration. Certain CICs below the prescribed asset size or without access to public funds may qualify for an exemption.

NBFC-Account Aggregator

An NBFC-AA provides account-aggregation services by collecting, consolidating and presenting a customer’s financial information with the customer’s consent. An Account Aggregator does not own the customer’s financial information and cannot use it for an unauthorised purpose. It is governed by a separate RBI regulatory framework.

NBFC-Peer-to-Peer Lending Platform

An NBFC-P2P operates an online or technology-based platform that facilitates loans between eligible lenders and borrowers. The platform functions as an intermediary and is not permitted to operate as an ordinary balance-sheet lender. The founder must comply with specialised requirements relating to participant exposure, fund flows, escrow arrangements, disclosures and platform governance.

Core Requirements for NBFC Registration

Incorporation as a Company

The applicant must be incorporated as a company under the Companies Act, 2013 or the corresponding provisions of the earlier Companies Act. A proprietorship, ordinary partnership firm or limited liability partnership cannot directly obtain a standard NBFC Certificate of Registration. The promoters must first incorporate a private limited or public limited company with an appropriate capital and governance structure.

Appropriate Object Clause

The Memorandum of Association should expressly authorise the company to undertake the financial activity for which registration is sought. Depending on the proposed model, the objects may cover lending, financing, providing loans and advances, asset finance, investment in securities, factoring, microfinance or another relevant financial activity.

The object clause should be precise enough to align with the category selected in the RBI application. An incorrect or overly broad object clause may create doubts regarding the company’s actual business model and regulatory category.

Minimum Net Owned Fund

A company applying for a regular NBFC registration is generally required to maintain a minimum Net Owned Fund of ₹10 crore from the date of application. The minimum amount applies to a new applicant from the beginning and is not a post-registration capital target. Existing NBFCs that were covered by the earlier lower capital requirement have been given time until March 31, 2027 to achieve the ₹10 crore threshold.

Minimum Capital for Specialised NBFCs

NBFC category	Minimum Net Owned Fund
General NBFC applicant	₹10 crore
Housing Finance Company	₹20 crore
NBFC-Infrastructure Finance Company	₹300 crore
Infrastructure Debt Fund-NBFC	₹300 crore
Mortgage Guarantee Company	₹100 crore
NBFC-Account Aggregator	₹2 crore
NBFC-Peer-to-Peer Lending Platform	₹2 crore
Standalone Primary Dealer undertaking core activities	₹150 crore
Standalone Primary Dealer undertaking core and non-core activities	₹250 crore

The capital requirement alone does not guarantee approval. The applicant must also satisfy the business-specific, governance, management and operational requirements applicable to the selected category.

Proper Calculation of Net Owned Fund

Net Owned Fund is not the same as authorised share capital or total funds available in the company’s bank account. Owned Fund broadly includes paid-up equity capital, compulsorily convertible preference shares, free reserves, share premium and eligible capital reserves. Accumulated losses, intangible assets and deferred revenue expenditure are deducted while calculating the amount.

Further deductions are made for specified investments, loans, advances, debentures and deposits involving subsidiaries, group companies and other NBFCs to the extent that they exceed the permitted percentage of Owned Fund. The calculation should be certified by a practising Chartered Accountant or statutory auditor and should be supported by the latest audited financial statements or an appropriate opening Balance Sheet.

Clear and Verifiable Source of Capital

The promoters must be able to establish the genuine source of the capital introduced into the applicant company. The RBI may examine bank statements, income-tax records, audited financial statements, net-worth certificates, share-allotment documents and the commercial background of the investors.

Borrowed, layered or unexplained funds may raise concerns regarding the financial soundness and suitability of the promoters. The company should maintain a clear documentary trail from the original source of funds to their receipt and allotment as share capital.

Fit-and-Proper Promoters and Directors

The promoters, shareholders and directors should have a satisfactory reputation, financial position and regulatory history. The RBI may examine their educational qualifications, financial-services experience, directorships, business interests, credit history, repayment record, litigation, criminal proceedings, regulatory actions and association with failed or non-compliant financial entities.

A founder should disclose adverse information truthfully. Concealment of a default, investigation, disqualification or past regulatory rejection may be more damaging than a properly explained disclosure.

Financial-Sector Experience

The proposed Board and senior management should collectively possess the knowledge required to operate a regulated financial institution. The management team should understand credit underwriting, loan documentation, collections, asset classification, provisioning, KYC, AML, customer protection, risk management, accounting and RBI reporting.

The RBI may be reluctant to approve a lending company where the promoters have sufficient capital but the Board and management lack relevant financial, banking, compliance or risk-management capability.

Detailed and Viable Business Plan

The applicant should prepare a realistic business plan covering at least the initial years of operations. The plan should explain the proposed loan products, borrower segments, geographical coverage, ticket size, interest-pricing model, sourcing channels, underwriting methodology, security structure, expected defaults, collection mechanism, technology platform and projected profitability.

Projected Balance Sheets, Profit and Loss Accounts and cash-flow statements should be internally consistent. The plan should also demonstrate that the company will maintain adequate capital, liquidity and operational resources after commencing lending. The RBI’s application framework permits it to request additional information where necessary to determine the applicant’s eligibility and suitability.

Proper Governance Structure

The company should establish a governance framework appropriate for a regulated financial institution. The Board must have clear oversight over lending, risk, compliance, audit, outsourcing, technology, customer complaints and recovery practices.

Responsibilities should be divided among directors, senior management, compliance personnel, credit teams and operational employees. A business in which all decisions are concentrated in one promoter without independent review, credit controls or compliance supervision may face regulatory concerns.

Operational and Technology Readiness

An applicant proposing digital or technology-enabled lending should demonstrate that its systems are capable of handling customer onboarding, KYC, credit assessment, loan documentation, disbursement, repayment tracking, collections, data security and regulatory reporting.

The applicant should identify the core lending platform, hosting arrangement, cyber-security controls, data-access rights, backup systems, business-continuity arrangements and technology vendors. Where the company intends to use a Lending Service Provider, mobile application or digital marketplace, its model must also be reviewed under the applicable RBI digital-lending requirements.

Policies That Should Be Prepared Before Filing

Credit and Lending Policy

The credit policy should define borrower eligibility, credit appraisal, documentation, security, sanctioning authority, exposure limits, repayment terms and monitoring procedures. It should also explain how the company will assess repayment capacity and prevent excessive or irresponsible lending.

Interest Rate and Pricing Policy

NBFC lending rates are generally not subject to a single RBI-imposed ceiling. However, the rate and the method used to determine rates for different categories of borrowers must be transparent. The applicable interest rate, charges and material terms should be disclosed in the application documents, sanction communication, loan agreement, Key Facts Statement and website, wherever required.

Fair Practices Code

The Fair Practices Code should address transparent loan processing, communication of terms, disbursement, changes in charges, recovery practices, repossession, grievance handling and treatment of borrowers. The policy should be approved by the Board and implemented across physical and digital channels.

KYC and Anti-Money Laundering Policy

The KYC and AML policy should cover customer identification, beneficial-ownership verification, risk classification, transaction monitoring, sanctions screening, suspicious transaction reporting and preservation of records. The policy must be appropriate for the nature of borrowers, delivery channels and geographic areas proposed to be served.

Asset Classification and Provisioning Policy

The company must have systems to identify overdue accounts, classify loan assets and make provisions according to the applicable RBI directions. The founders should incorporate expected credit losses, defaults, write-offs and collection expenses into the financial projections instead of assuming that every sanctioned loan will be fully recovered.

Recovery and Collection Policy

The recovery policy should prohibit intimidation, harassment and other coercive practices. It should establish approved communication methods, contact hours, escalation procedures, settlement authority, repossession processes and supervision of employees or recovery agents.

Grievance Redressal Policy

The company should establish a mechanism through which borrowers can submit complaints and escalate unresolved matters. The policy should identify the grievance officer, resolution timelines, internal escalation levels and applicable external complaint mechanisms.

Outsourcing Policy

Where customer sourcing, verification, call-centre operations, collections, technology or documentation will be outsourced, the company should define vendor-selection, due-diligence, monitoring, data-security and termination requirements. Outsourcing does not transfer the NBFC’s regulatory responsibility to the service provider.

Documents Required for NBFC Registration

The exact documentation depends on the applicant’s category, ownership structure and business model. The RBI’s checklist is indicative, and the RBI may request additional records during examination.

Corporate Documents

The application generally includes the Certificate of Incorporation, Memorandum of Association, Articles of Association, Corporate Identity Number, PAN and registered-office documents. Where the company has changed its name, objects, capital or registered office, the supporting certificates, resolutions and MCA filings should also be provided.

Financial Documents

The applicant should provide its audited financial statements for the available financial years, an opening Balance Sheet where applicable, Net Owned Fund calculation and a statutory auditor’s certificate. Documents explaining accumulated losses, intangible assets, group exposures, investments and the source of capital may also be required.

Promoter and Director Documents

The RBI may require KYC documents, curriculum vitae, educational qualifications, experience certificates, directorship details, shareholding details, net-worth certificates and credit reports of promoters and directors. Declarations regarding criminal cases, regulatory proceedings, defaults, disqualifications and association with unincorporated financial entities should be complete and consistent.

Board Resolutions and Declarations

The Board should approve the proposal to apply for NBFC registration and authorise a director or officer to submit the application. The company may also need declarations concerning non-acceptance of unauthorised public deposits, non-commencement of financial business before registration and compliance with the RBI Act.

Group Structure Information

The applicant should disclose its holding company, subsidiaries, associates, related parties and other entities under common ownership or management. Where another NBFC, bank, insurance company, securities intermediary or regulated financial institution exists in the group, its regulatory status and relationship with the applicant should be explained.

Banker’s Reports

The RBI may seek reports from the bankers of the applicant, promoters, group companies or entities in which the directors have substantial interests. These reports help the RBI assess account conduct, repayment discipline and the financial standing of the applicant and its promoters.

Business Plan and Financial Projections

The business plan should be accompanied by projected Balance Sheets, projected Profit and Loss Accounts, cash-flow statements and expected asset-income patterns. The assumptions relating to loan growth, funding costs, defaults, operating expenses, provisioning and profitability should be clearly explained.

Policies and Operational Documents

The application should be supported by the proposed credit policy, Fair Practices Code, KYC and AML policy, risk-management policy, grievance-redressal policy, recovery policy and outsourcing context. Technology-enabled applicants may also provide system architecture, cyber-security arrangements, vendor details, data-flow documents and business-continuity plans.

NBFC Registration Process

Step 1: Determine Whether Registration Is Required

The founders should apply the 50-50 test and examine whether the business will involve public funds or customer interface. A company that qualifies for the 2026 Unregistered Type I exemption may not need RBI registration, but a retail, MSME, consumer, business or digital-lending company will generally have customer interface and should evaluate Type II registration.

Step 2: Select the Correct NBFC Category

The applicant must determine whether its model falls under NBFC-ICC, NBFC-MFI, NBFC-Factor, HFC, IFC, CIC, Account Aggregator, P2P platform or another specialised category. Selecting the wrong category can result in regulatory queries, restructuring of the business plan or rejection of the application.

Step 3: Incorporate or Restructure the Company

The promoters should incorporate a company with the appropriate name, objects, capital structure and Board composition. An existing company may be used, but its past activities, financial statements, liabilities, compliance history and transactions must be carefully reviewed before it is converted into an NBFC applicant.

Step 4: Infuse the Required Capital

The promoters should introduce sufficient equity capital to meet the applicable Net Owned Fund requirement. The capital should be fully traceable, free from unexplained layering and supported by proper share allotment and MCA filings. The company should retain enough additional resources for technology, staffing, legal documentation and initial operating expenses.

Step 5: Appoint a Competent Board and Management Team

The company should appoint directors and senior personnel having relevant experience in finance, banking, credit, risk, law, accounting, compliance or technology. The role of each director and key employee should be clearly described in the application and business plan.

Step 6: Prepare Policies and Operational Systems

Before filing, the company should prepare its policies, loan documents, credit process, KYC workflow, accounting system, compliance calendar and regulatory reporting mechanism. The RBI may assess not only whether the applicant has sufficient capital but also whether it can operate safely and responsibly after receiving approval.

Step 7: File the Application through PRAVAAH

The application for NBFC registration is filed through the RBI’s PRAVAAH portal with the prescribed information and supporting documents. The latest RBI FAQ identifies PRAVAAH as the application channel. Applicants should follow the portal-generated instructions and any RBI communication concerning original or physical documents.

Step 8: RBI Scrutiny of the Application

The RBI examines the company’s ownership, capital, source of funds, management, business plan, group structure, financial projections, policies and operational readiness. The application may be returned or kept pending if documents are inconsistent, incomplete or unsupported. The RBI may ask for additional information beyond the standard checklist.

Step 9: Respond to RBI Queries

The company must respond to every RBI query carefully and within the prescribed period. Responses should be supported by Board resolutions, auditor certificates, bank statements, revised policies, legal explanations or other evidence. Merely repeating the original application without resolving the concern may delay the process.

Step 10: Grant of Certificate of Registration

Where the RBI is satisfied that the company meets the legal, financial, governance and public-interest requirements, it may issue the Certificate of Registration. The company must comply with any category-specific or operational conditions mentioned in the certificate. Approval is discretionary and cannot be claimed merely because the minimum capital has been deposited.

Can a Newly Registered NBFC Accept Public Deposits?

An ordinary NBFC registration does not authorise the company to accept public deposits. Only NBFCs holding a specific deposit-taking Certificate of Registration and the required investment-grade credit rating may accept or hold public deposits within the prescribed limit. RBI states that it has not granted new deposit-taking NBFC registrations since 1997 as a matter of public policy. Founders should therefore not prepare a business model that depends on collecting fixed deposits from the public unless the company already holds the required deposit-taking authorisation.

RBI Scale-Based Regulatory Structure

Registered NBFCs are classified under the Scale-Based Regulation framework into the Base Layer, Middle Layer, Upper Layer and Top Layer. The applicable compliance burden depends on factors such as asset size, deposit status, business activity, systemic importance and risk profile.  

A company may initially fall within the Base Layer but become subject to enhanced capital, governance, exposure, disclosure and risk-management requirements as it grows or enters a higher regulatory layer. Founders should therefore build systems that can scale with the business rather than treating registration requirements as a one-time exercise.

Post-Registration Compliances

• Maintenance of Net Owned Fund: The company must continue maintaining the applicable Net Owned Fund after obtaining registration. Capital erosion caused by losses, group exposures, intangible assets or other deductions may affect compliance even where the paid-up share capital remains unchanged.

• Prudential Norms: The NBFC must comply with the prudential requirements applicable to its category and regulatory layer. These may include capital adequacy, leverage, income recognition, asset classification, provisioning, exposure limits and liquidity management.

• RBI Returns: Registered NBFCs are required to submit supervisory returns in accordance with the RBI’s Filing of Supervisory Returns Directions. Returns may cover financial position, asset quality, borrowings, capital, liquidity, customer complaints and other regulatory information.

• KYC and AML Compliance: The company must undertake customer due diligence, preserve records, monitor transactions and make applicable reports under the KYC and anti-money laundering structure. KYC compliance should form part of the actual onboarding process and should not remain limited to a written policy.

• Fair Practices and Customer Disclosures: The NBFC must communicate the annualised interest rate, fees, penalties and other material terms transparently. Borrowers should receive appropriate sanction communications, loan agreements and Key Facts Statements wherever applicable.

• Statutory Audit and Auditor Reporting: The statutory auditor has an important role in certifying the company’s financial position and reporting whether it continues to satisfy the conditions required for holding an NBFC registration. The auditor may also have specific reporting obligations concerning non-compliance with RBI directions.

• Changes in Shareholding and Control: Prior RBI approval is generally required for acquisition or transfer of 26% or more of the paid-up equity capital of an NBFC, including certain transfers within a group. Founders should therefore assess RBI approval requirements before executing major investment, acquisition or restructuring transactions.

• Grievance Redressal: The Board must establish an effective grievance-redressal mechanism through which borrower disputes can be reviewed and escalated. Certain customer-facing NBFCs are also covered under the Reserve Bank-Integrated Ombudsman Scheme according to their deposit status, customer interface and asset size.

Common Reasons for Delay or Rejection

• Incorrect Regulatory Category: An application may face objections where the business plan describes microfinance, factoring, housing finance or P2P activities but the company applies under a general NBFC category.

• Inadequate or Untraceable Capital: Capital introduced immediately before filing, without adequate proof of the promoters’ financial capacity, may result in further scrutiny.

• Weak Management Profile: A Board without relevant financial, compliance or risk-management experience may not demonstrate the capability required to run a regulated lending business.

• Unrealistic Financial Projections: Projections showing rapid loan growth, negligible defaults, low collection costs and immediate profitability may appear commercially unrealistic. The assumptions should reflect reasonable credit losses, operating costs, capital requirements and funding constraints.

• Previous Unauthorised Lending: Where the company has already carried on lending or investment activity without registration, it must disclose and explain the position instead of concealing it. The RBI may examine whether the company has stopped the activity and whether its auditor has certified the factual position.

• Inconsistent Documents: Differences in shareholding, addresses, director details, capital figures, group relationships or business activities across documents may delay scrutiny.

• Weak Policies: Generic policies copied from unrelated institutions may not be accepted as evidence of operational preparedness. The policies should reflect the applicant’s actual products, customers, technology, risk profile and organisation.

• Adverse Credit or Regulatory History: Loan defaults, cheque-bounce proceedings, criminal matters, regulatory penalties or links with failed financial entities may affect the fit-and-proper evaluation. The applicant should provide complete disclosures and appropriate explanations.

Key Points Every Founder Should Remember

An NBFC application should be treated as the establishment of a regulated financial institution rather than an ordinary company-registration exercise. The ₹10 crore Net Owned Fund requirement is only one part of the eligibility framework. The founders must select the correct NBFC category, maintain a transparent source of capital, appoint a competent Board, prepare a viable business plan and establish lending, risk, KYC, technology and customer-protection systems.

A customer-facing lending company should not commence business merely because its RBI application has been filed. It must wait until the Certificate of Registration is granted. A company operating without customer interface and public funds should examine whether it falls within the 2026 Unregistered Type I NBFC exemption. However, the exemption should not be used where the actual plan involves lending to customers or accessing external funds.

Frequently Asked Questions

Q1. What is the minimum capital required for a new NBFC?

Ans. A new general NBFC applicant must ordinarily maintain Net Owned Fund of at least ₹10 crore. Specialised categories such as HFCs, IFCs, IDF-NBFCs, Account Aggregators and P2P platforms have separate minimum capital requirements.

Q2. Can an LLP obtain NBFC registration?

Ans. No. A standard NBFC applicant must be incorporated as a company under the Companies Act. An LLP, partnership firm or proprietorship cannot directly obtain a regular NBFC Certificate of Registration.

Q3. Can a company start lending while its RBI application is pending?

Ans. A company that is required to register as an NBFC should not commence non-banking financial business until it receives the Certificate of Registration. Carrying on such business without registration may attract regulatory action.

Q4. Is authorised share capital of ₹10 crore sufficient?

Ans. No. Authorised share capital represents only the maximum capital that the company may issue. The applicant must maintain actual Net Owned Fund of at least ₹10 crore after applying the prescribed deductions.

Q5. Is NBFC registration mandatory for every company providing loans?

Ans. Not necessarily. Registration depends on whether financial activity constitutes the company’s principal business under the 50-50 test and whether any regulatory exemption applies. However, companies proposing organised customer-facing lending as their principal business should generally evaluate NBFC registration before commencing operations.

Q6. What is a Type II NBFC?

Ans. A Type II NBFC is a registered NBFC that has or intends to have customer interface, access public funds or otherwise does not qualify as a Type I NBFC. Retail-lending, MSME-lending, consumer-finance and most customer-facing fintech-lending businesses ordinarily fall within this category.

Q7. What is an Unregistered Type I NBFC?

Ans. It is a company carrying on non-banking financial activity without public funds or customer interface, as a conscious and long-term model, with asset size below ₹1,000 crore and fulfilling the prescribed Board and disclosure conditions.

Q8. Is RBI approval guaranteed after maintaining ₹10 crore?

Ans. No. The RBI also examines the applicant’s promoters, source of funds, management, group structure, business plan, governance, policies and public-interest considerations.

Q9. Can a new NBFC accept fixed deposits from the public?

Ans. No. A general NBFC registration does not permit acceptance of public deposits. A specific deposit-taking authorisation is required, and the RBI has not granted new deposit-taking NBFC registrations since 1997.

Q10. How long does NBFC registration take?

Ans. The RBI does not guarantee approval within a fixed period. The time depends on the category, ownership structure, completeness of documents, regulatory queries and the applicant’s response time.