NBFC registration India is the first regulatory hurdle for anyone who plans to lend money, finance assets or invest as a company without becoming a bank. This guide is for promoters and founders who are still deciding on NBFC registration India. By the end you will know what an NBFC is, whether you need registration at all, and which seven checks to complete before you spend money on an application.
Each check follows the Reserve Bank of India (RBI) pages we opened, and where a figure is not stated there we say so. It is general information, not professional advice, and the rules change, so always confirm the latest position on rbi.org.in.
Key Takeaways
- NBFC registration India means obtaining a Certificate of Registration from the RBI under section 45-IA of the RBI Act, 1934, before you start NBFC business.
- The RBI decides the application. Livida assists with documents and compliance, and does not approve or guarantee anything.
- Check first whether your business passes the 50-50 principal business test and whether an exemption applies.
- The RBI's FAQ states a general Net Owned Fund minimum of Rs 10 crore for new applicants, with different figures for some categories.
- Plan returns and RBI compliance for NBFC operations before you apply, not after.
In This Article
- What an NBFC Is and Why NBFC Registration India Matters
- Check 1: Does Your Business Pass the Principal Business Test?
- Check 2: Do You Need NBFC Registration India at All?
- Check 3: Which Category and Layer Fits Your Plan?
- Check 4: Is the Applicant a Company?
- Check 5: Can You Meet the Net Owned Fund Requirement?
- Check 6: Is Your NBFC Registration India File Ready?
- Check 7: Have You Planned Returns and Compliance?
- Illustrative Example: A Lending Startup Plans Its Application
- Common Mistakes to Avoid
- Summary
- Conclusion
What an NBFC Is and Why NBFC Registration India Matters
A Non-Banking Financial Company (NBFC) is a company incorporated under the Companies Act whose principal business is lending, investing in securities, leasing or hire purchase. It needs a Certificate of Registration from the RBI before it operates. The RBI is India's central bank and the regulator of NBFCs.
Under section 45-IA of the RBI Act, 1934, a company cannot operate as an NBFC without that certificate. The RBI's FAQ also warns of penal action, including prosecution, for companies that carry on NBFC business without registration. That is why NBFC registration India decisions should be made before any lending begins.
How an NBFC Differs from a Bank
An NBFC is not a bank in disguise. The RBI's FAQ states three differences:
- An NBFC cannot accept demand deposits.
- An NBFC is not part of the payment and settlement system and cannot issue cheques drawn on itself.
- Depositors of deposit-taking NBFCs do not get Deposit Insurance (DICGC) cover.
The same FAQ lists companies whose main business is agriculture, industry, trading goods, providing services or dealing in real estate as outside the NBFC definition.
The Rulebook You Will Be Working With
The main document is the RBI's Non-Banking Financial Companies (Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025, issued on 28 November 2025. The RBI's page shows it updated to 1 July 2026. Older guides that quote the 2021 or 2023 framework may be out of date.
Check 1: Does Your Business Pass the Principal Business Test?
The first gate in NBFC registration India is the principal business test. The RBI treats a company as an NBFC when financial business is its principal business. Both parts of the 50-50 test must be met: financial assets are more than 50 per cent of total assets (net of intangible assets), and income from financial assets is more than 50 per cent of gross income.
A company that mostly holds loans and investments, and earns mostly interest and similar income, is likely an NBFC. A company that mainly trades goods or sells services, and lends only on the side, is probably outside NBFC registration India rules.
Here is a quick self-test you can run with your latest numbers:
- List your total assets and subtract intangible assets.
- Add up loans, investments and other financial assets.
- Divide the second figure by the first and compare it with 50 per cent.
- Repeat for income: financial income divided by gross income.
For a new company, run the test on your projected first-year balance sheet. Your business plan and the test should tell the same story.
Check 2: Do You Need NBFC Registration India at All?
Not every lending-related company has to register. The RBI's FAQ lists entities regulated by other bodies that are exempt from RBI registration, including insurers with a valid IRDA certificate, Nidhi companies, chit companies, stock exchanges, mutual benefit companies, and SEBI-registered AIFs, merchant banking and stock broking companies.
There is also a newer route for small, inward-looking companies. The Directions, as amended in 2026, exempt NBFCs that take no public funds, have no customer interface and have assets below Rs 1,000 crore from the registration requirement. The FAQ calls these Type I NBFCs.
What Counts as Public Funds and Customer Interface
The RBI's FAQ explains both terms. Public funds include loans from directors and shareholders and margin trading funds. Customer interface includes lending, guarantees and inter-corporate deposits, including to group entities, shareholders and directors. Employee loans on employment terms are excluded.
This matters for family and group structures. A holding company that only invests within a group may fall in the exempt group, while a company that lends to outsiders must complete NBFC registration India steps. The FAQ also says a company that later wants public funds or customer interface must obtain a Type II Certificate of Registration first.
Why This Check Saves Money
If an exemption fits, you may avoid a long application and a large capital requirement. If it does not, you know the application is unavoidable. Either way, record the reasoning in a board note, because the exemption conditions include board resolutions and disclosure in the accounts.
Check 3: Which Category and Layer Fits Your Plan?
The category is the type of NBFC you intend to be, and the layer is the level of RBI regulation that follows from size and activity. Choosing the category first lets you read the right Net Owned Fund NBFC figure and the right compliance set for NBFC registration India. A wrong choice can force a fresh application later.
The Directions name categories such as NBFC-ICC (investment and credit company), NBFC-MFI (microfinance institution), NBFC-Factor, NBFC-P2P (peer to peer), NBFC-AA (account aggregator), IDF-NBFC and NBFC-IFC. Housing finance companies, core investment companies and a few others have their own directions.
The Four Layers
The RBI's scale based regulation sorts NBFCs into four layers:
- Base Layer: non-deposit-taking NBFCs below Rs 1,000 crore in assets, plus NBFC-P2P, NBFC-AA, NOFHCs and Type I NBFCs.
- Middle Layer: all deposit-taking NBFCs, non-deposit-taking NBFCs of Rs 1,000 crore or more, and categories such as HFCs and IDF-NBFCs.
- Upper Layer: NBFCs with assets of Rs 1,00,000 crore and above, identified by the RBI each year.
- Top Layer: populated only if the RBI sees a large rise in systemic risk. It is ideally expected to be empty.
A new lender will usually start in the Base Layer, and crossing Rs 1,000 crore in assets moves it to the Middle Layer.
The Seven Checks at a Glance
The table below summarises the whole guide so you can use it as a planning sheet.
| Check | Question to answer | Where to verify |
|---|---|---|
| 1 | Do we pass the 50-50 test? | RBI NBFC FAQ |
| 2 | Is an exemption available? | RBI Directions |
| 3 | Which category and layer? | RBI Directions |
| 4 | Is the applicant a company? | Companies Act filings |
| 5 | Can we show the Net Owned Fund? | RBI Directions |
| 6 | Is the file ready for PRAVAAH? | RBI forms page |
| 7 | Are returns planned? | RBI forms page |
Check 4: Is the Applicant a Company?
Only a company incorporated under the Companies Act, 1956 or 2013 can apply for NBFC registration India. The RBI's FAQ is clear on this. A sole proprietorship, a partnership or an LLP cannot hold an NBFC Certificate of Registration, so the structure decision comes before the application.
In practice most promoters use a private limited company. Our guide to registering a private limited company in India explains the steps, and the comparison of private limited, LLP and OPC structures shows why the other forms do not fit. Directors also need valid identities and signatures, covered in our post on digital signatures and e-KYC for company incorporation.
Get the Objects Clause Right
Your Memorandum of Association should list financial activities as the main object. In the files we handle, a mismatch between the stated objects and the business plan is a common reason for avoidable queries. Also think about who your shareholders and directors will be, because the application asks about them.
Check 5: Can You Meet the Net Owned Fund Requirement?
Net Owned Fund (NOF) is the capital base the RBI looks at to judge whether a company can run NBFC business safely. It is built from owned funds, with specified deductions. The RBI's FAQ states Rs 10 crore as the general minimum, and says new applicants need it from the start.
Here is what the RBI pages state for Net Owned Fund NBFC planning:
- Para 39 of the Directions specifies Rs 10 crore for NBFC-ICC, NBFC-MFI and NBFC-Factor.
- Para 40 specifies Rs 2 crore for NBFC-P2P, NBFC-AA and Type I NBFCs.
- Para 41 specifies Rs 300 crore for NBFC-IFC and IDF-NBFC.
- The FAQ lists other figures for housing finance companies, primary dealers and mortgage guarantee companies.
Existing NBFCs that were below Rs 10 crore have until 31 March 2027 to reach it, and an NBFC that misses its target cannot hold the certificate. That glide path does not apply to a new applicant, who needs the full amount at the start.
How the Calculation Works
Para 45 of the Directions explains that investments, loans and exposures to subsidiaries, group companies and other NBFCs above 10 per cent of paid-up equity capital and free reserves are deducted. So your headline capital is not always your Net Owned Fund. A promoter who injects capital and then lends part of it to a group company may find the NOF lower than expected.
Evidence Matters as Much as Amount
Keep proper bookkeeping and accounting records, and be ready to evidence the capital with bank and auditor documents. The RBI checklists we reviewed refer to certified incorporation papers, board resolutions and banker or auditor support for the fund. Keep the capital in place and traceable while the application is under review.
Our NBFC registration assistance team can prepare the Net Owned Fund working and supporting papers. The RBI still decides whether the application meets its requirements.
Check 6: Is Your NBFC Registration India File Ready?
The application for NBFC registration India, meaning the Certificate of Registration RBI issues, is filed on the RBI's PRAVAAH portal. According to the RBI's FAQ, the company applies with the documents prescribed in Press Release 2015-2016/2935 dated June 17, 2016. The FAQ does not state a processing time, so plan with a buffer.
The RBI's NBFC forms page hosts the Common NBFC Registration Form and category checklists. Download the current versions for your category.
The NBFC Registration Process Step by Step for India
Here is the usual path from idea to filing. Your category may add steps.
- Confirm the principal business and exemption position (Checks 1 and 2).
- Choose the category and layer (Check 3).
- Incorporate the company or amend the existing one (Check 4).
- Raise and document the Net Owned Fund (Check 5).
- Prepare the board resolution, business plan, director and shareholder disclosures and financial statements.
- Download the current form and checklist from the RBI website.
- Submit on PRAVAAH and answer RBI queries promptly.
- Do not begin NBFC business until the Certificate of Registration is issued.
What the RBI Reviews
The RBI reviews the file and may ask for clarifications. In our experience, incomplete or inconsistent documents cause the longest back and forth. Names, dates and figures should match across the board resolution, the auditor papers and the business plan.
Livida assists with documents and compliance work. The RBI decides whether to grant the certificate, and no adviser can promise the outcome.
Check 7: Have You Planned Returns and Compliance?
NBFC registration India is the start, not the finish. A registered NBFC must follow the Directions for its layer and category, file the returns and certificates the RBI prescribes, and meet Companies Act obligations. Planning RBI compliance for NBFC operations early prevents penalties and keeps the certificate safe.
The RBI forms page lists periodic returns and certificates by type of NBFC, such as the CEO and statutory auditor certificate for NBS-7 for systemically important non-deposit-taking NBFCs, and a special return for all NBFCs. The exact set depends on your category, so confirm it on the RBI site.
Three Layers of Ongoing Work
Compliance falls into three groups:
- RBI returns and certificates: periodic filings and auditor or officer certificates as prescribed for your category.
- Directions on conduct and capital: the rules that apply to your layer, including Net Owned Fund maintenance.
- Company law filings: annual accounts and returns with the Registrar of Companies, board meetings, director KYC, plus the usual GST and tax filings.
Our NBFC compliance support service covers the first two groups, and the third is covered by annual compliance for a private limited company. Our post on annual ROC compliance for a private limited company lists the company law cycle in detail.
Why Finance Leadership Helps
An NBFC has capital, lending and reporting decisions that run together. Many promoters add part-time senior finance support rather than a full-time CFO at the start. Our virtual CFO advisory service supports budgeting, cash flow planning and reporting. It does not replace the board's duty under the RBI Directions.
Illustrative Example: A Lending Startup Plans Its Application
This example is invented to show how the NBFC registration India checks work together. It is not a real client story, and the facts are simplified.
Consider a private limited company set up by two founders to lend to small traders. It plans to raise money from shareholders and bank borrowings, and it will lend to outside customers.
- Check 1: its projected balance sheet is mostly loans and its income is mostly interest, so it expects to pass the 50-50 test.
- Check 2: it lends to customers, so the exemption is not available.
- Check 3: it plans a non-deposit-taking NBFC-ICC in the Base Layer.
- Check 4: its objects clause lists trading, so it amends it.
- Check 5: it plans the Rs 10 crore from the start and checks the deductions.
- Check 6: it downloads the current form and checklist and files on PRAVAAH.
- Check 7: it appoints an auditor and calendars the returns early.
The founders do not start lending until the NBFC registration India application succeeds and the RBI grants the certificate. The outcome depends on the RBI's review, not on how well the checklist was followed.
Common Mistakes to Avoid
Most NBFC registration India problems are planning mistakes, not form-filling mistakes. These are the ones to avoid.
- Starting lending before the Certificate of Registration RBI issues. The FAQ warns of penal action, including prosecution.
- Using an old guide that quotes outdated rules. The Directions were reissued in 2025 and amended in 2026.
- Assuming one Net Owned Fund NBFC figure fits every category.
- Forgetting the NOF deductions in para 45 when capital is lent to group companies.
- Choosing an LLP or partnership. Only a company can apply.
- Describing the business differently in the plan, board resolution and accounts.
- Ignoring returns and certificates until the first deadline arrives.
- Promising investors a launch date, when the FAQ gives no processing time.
Summary
NBFC registration India requires a company whose principal business is financial to obtain a Certificate of Registration from the RBI under section 45-IA. Run seven checks first: the 50-50 test, exemptions, category and layer, company status, Net Owned Fund, application readiness and ongoing returns. File on PRAVAAH with the right checklist and keep the capital traceable. The RBI decides, and Livida assists with documents and compliance.
Conclusion
The best NBFC registration India applications are decided long before the form is filed. They begin with an honest test of the business model, the right category, capital that is real and traceable, and a compliance plan that is ready on day one. Skipping these checks usually costs more time than doing them.
If you want a second pair of eyes on your plan, speak to us. We help with documents, the NBFC registration process and ongoing compliance, and we are clear about one point: the RBI makes the decision. Use our contact details below for a first conversation.
Talk to Livida
If you are weighing NBFC registration India, whether you need help testing the principal business criteria, preparing the Net Owned Fund working or organising the file for PRAVAAH, you can reach us through our contact page, by email at info@livida.in, or by phone at +91 94860 33194. We will review your plan and tell you what the documents need. We assist with documents and compliance, and the RBI decides on every application.
References
- RBI: All you wanted to know about NBFCs (FAQs)
- RBI: What is a Non-Banking Financial Company (NBFC)?
- RBI: NBFC (Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025
- RBI: NBFC forms, checklists and periodic returns
Reviewed for accuracy in November 2026.
