Nbfc returns
Shobhit Jain
(Querist) 25 May 2020
This query is : Resolved
Which returns need to be submitted by Non-deposit taking NBFC to RBI having asset less than Rs 50 crores?
Raj Kumar Makkad
(Expert) 25 May 2020
Financial activity as principal business is when a company’s financial assets constitute more than 50 per cent of the total assets and income from financial assets constitute more than 50 per cent of the gross income. A company which fulfils both these criteria will be registered as NBFC by RBI. The term 'principal business' is not defined by the Reserve Bank of India Act. The Reserve Bank has defined it so as to ensure that only companies predominantly engaged in financial activity get registered with it and are regulated and supervised by it. Hence if there are companies engaged in agricultural operations, industrial activity, purchase and sale of goods, providing services or purchase, sale or construction of immovable property as their principal business and are doing some financial business in a small way, they will not be regulated by the Reserve Bank. Interestingly, this test is popularly known as 50-50 test and is applied to determine whether or not a company is into financial business.
Raj Kumar Makkad
(Expert) 25 May 2020
In terms of Section 45-IA of the RBI Act, 1934, no Non-banking Financial company can commence or carry on business of a non-banking financial institution without a) obtaining a certificate of registration from the Bank and without having a Net Owned Funds of ₹ 25 lakhs (₹ Two crore since April 1999). However, in terms of the powers given to the Bank, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking companies registered with SEBI, Insurance Company holding a valid Certificate of Registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act, 1956, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982,Housing Finance Companies regulated by National Housing Bank, Stock Exchange or a Mutual Benefit company.
Rajendra K Goyal
(Expert) 26 May 2020
Please visit RBI master circular on NBFC returns. Circular reference RBI/2015-16/87 DNBS.IT.CC.No.01/24.01.191/2015-16 dated July 01, 2015 at following link:
https://m.rbi.org.in/Scripts/BS_ViewMasterCirculars.aspx?Id=9896&Mode=0
