Compliances for NBFC-ND-NSI Companies

Definition of Non- a Banking Financial Company (NBFC)

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 or 2013 engaged in the business of

1. loans and advances
2. acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature
3. leasing, hire-purchase,
4. insurance business
5. chit business

but does not include any institution whose principal business is that of

1. agriculture activity
2. industrial activity
3. purchase or sale of any goods (other than securities) or
4. providing any services and sale/purchase/construction of the immovable property.

A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or installments by way of contributions or in any other manner is also a non-banking financial company (Residuary non-banking company). The major compliances to be undertaken by Non-Deposit taking Non-Systematically Important Company are being discussed in this Article.

Types of NBFC’s:

Based on the activities and liabilities there are two types of NBFC’s, they are as follows:

Requirements for complying with the NBFC’s Compliances:

Reserve Bank of India has migrated the existing supervisory return online filing process from the COSMOS platform to the XBRL system. In this regard, every NBFC is required to have the following in place to file returns on XBRL portal:

1. Obtain the User Id and Password from RBI
2. Installation of required XBRL tool based on the return to be filed from XBRL system
3. Updating of profile on the XBRL portal every quarter.

Mandatory compliances for Non-Deposit taking Non-Systematically Important Company:

Sl. No.	Particulars	Reporting Time	To be submitted by	Reference of Act / Rules or Circular
1.	NBFC-ND has to pass a Board resolution stating that it has neither accepted public deposit nor would accept any public deposit during the year.	within thirty days of the commencement of every financial year	NBFC- Non-deposit Systematically Important Company (NBFC-ND)	Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 (Point (iv) and (v) of Para 2 of the Directions, 2016)
2.	The company has to file NBS-9 (Annual Return) for NBFC (non-deposit taking) with asset size below 100 Cr and NBS-8 for NBFC (non-deposit taking) with asset size between 100 Cr to 500 Cr. New form DNBS02 has been introduced to facilitate this filing in XBRL mode.	Within 60 days from the end of the financial year i.e by 30th May.	NBFC – ND	Master Direction- Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016
3	Statutory Auditor Certificate (SAC)  (To report that the NBFC is engaged in the business of NBFI, requiring the CoR.). New form DNBSS010 has been introduced to facilitate this filing in XBRL mode.	within one month from the date of finalization of the balance sheet and in any case not later than December 30th of that year	All NBFCs	Master Direction- Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016
4	Every NBFC shall create a reserve fund and transfer therein a sum not less than 20% of its net profit every year as disclosed in the profit and loss account.	Every year	All NBFCs	Section 45-IC, Reserve Bank of India Act, 1934
5	Annual Return on Foreign liabilities & Assets	Every yearon or before 15th July	All companies including NBFC having foreign Investment	A.P. (DIR Series) Circular No.45 dated March 15, 2011
6	Certificate from Statutory Auditor on compliance of FDI norms	Half-yearly – within 30 days	NBFCs having FDI	Master Direction- Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016
7	Overseas investment return. New form DNBS13	Quarterly – within 45 days of closure of quarter	NBFCs having overseas investment return	Master Direction- Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016
8	No loan against own shares shall be given	Ongoing	All NBFC	Master Direction – Non-Banking Financial Company –Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 (Chapter IV)
9	Transaction in Government Securities- NBFC shall undertake transactions in  Government securities through its CSGL account or its Demat account.	Ongoing	All NBFC	Master Direction – Non-Banking Financial Company –Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 (Chapter IV)
10	NBFCs shall lay down grievance redressal mechanism within the organization	Ongoing	All NBFC	Master Direction – Non-Banking Financial Company –Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016
EVENT BASED COMPLIANCES
11	Intimation to RBI-Information about the change of address, directors, auditors, Principal officer, specimen signature, etc. should be furnished to RBI	Within 1 month from the date of occurrence of any change	All NBFC	Master Direction – Non-Banking Financial Company –Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 (Chapter IV)
12	Prior written permission from RBI for change in control (transfer of share amounting to 26% of the paid-up capital) and change in management more than 30% of the Directors excluding Independent Directors.	NA	All NBFC	Master Direction – Non-Banking Financial Company –Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 (Chapter IX)
13	Prior approval for the opening of subsidiary/joint venture/representative office abroad	NA	All NBFC	Master Direction – Non-Banking Financial Company –Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 (Chapter X)
14	NBFC shall not become a partner in the firm including LLP	NA	All NBFC	Master Direction – Non-Banking Financial Company –Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016

Conclusion:

All NBFC’s have to strictly be required to follow the compliances as prescribed under the relevant regulations described above. Furthermore, the consequences of non-compliance will lead to a hefty penalty and cancellation of a license which leads to shutting down the company.

Disclaimer: The entire contents of this document have been developed based on relevant provisions and are purely the views of the authors. Though the author has made utmost efforts to provide authentic information, however, the authors and the company expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and consequences of anything done or omitted to be done by any such person in reliance upon the contents of this document.