Understanding NBFC Compliance Requirements

[atulshukla]

Non-Banking Financial Companies (NBFCs) play a key role in strengthening India’s financial ecosystem. They offer loans, investments, asset financing, and other financial services, especially to sectors underserved by traditional banks. However, NBFCs must follow strict compliance requirements regulated by the Reserve Bank of India (RBI) to ensure financial stability, transparency, and trust.

Key NBFC Compliance Requirements

1. RBI Registration
   Every NBFC must register with the RBI under the RBI Act, 1934, and obtain a Certificate of Registration (CoR) before commencing operations. Minimum net owned funds (NOF) of ₹2 crores are required.

2. KYC and AML Norms
   NBFCs must adhere to Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines to verify customer identity and prevent illegal financial activities.

3. Periodic Returns
   NBFCs are required to file various returns such as:

NBS-1: Quarterly return on financial indicators

NBS-2: Quarterly return on Prudential Norms

NBS-9: Annual return for NBFCs not accepting public deposits

These returns help RBI monitor the performance and risk exposure of NBFCs.

1. Audited Financial Statements
   NBFCs must prepare and file audited financial statements annually. They must comply with Indian Accounting Standards (Ind AS) and maintain proper books of accounts.

2. Statutory Auditor Certificate
   A certificate from a statutory auditor confirming the company is not accepting public deposits beyond the permissible limit is mandatory.

3. Credit Rating
   Loan and investment NBFCs must obtain a credit rating if they accept public deposits to indicate their financial health to investors and customers.

4. Fair Practice Code
   NBFCs are expected to adopt a Fair Practice Code (FPC) to promote transparent dealings with customers, including loan terms, grievance redressal, and data privacy.

5. Corporate Governance Norms
   Larger NBFCs, especially those classified as NBFC-ND-SI (Systemically Important), must follow enhanced governance norms such as board oversight, risk management policies, and internal audits.

Final Words
NBFC compliance is essential for legal operations, investor confidence, and customer trust. Staying updated with the latest RBI guidelines and adopting good governance practices ensures smooth and sustainable functioning.

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