Non-Banking Financial Companies (NBFCs) are critical to India’s credit ecosystem — helping fill gaps left by banks, especially in lending to SMEs, consumers, and niche segments. But with this role comes responsibility: every NBFC must secure and maintain an NBFC registration from the RBI. When an NBFC fails to meet regulatory standards, the RBI can cancel its registration. What the law also provides is an appeal mechanism. Knowing this path is essential.
What is NBFC Registration and Why It Matters
An NBFC registration is a certificate from the RBI enabling a company to operate as a Non-Banking Financial Company – for lending, hire purchase, investment, leasing etc. Without valid registration the business cannot legally engage in NBFC activities. The registration signals that the entity is recognised, governed and eligible under non-bank financial regulation.
Reasons for Cancellation of NBFC Registration by RBI
The RBI may cancel an NBFC’s registration for a variety of reasons. Commonly:
- Failing to maintain required Net Owned Fund (NOF) or capital thresholds.
- Engaging outside permitted NBFC activities under that registration.
- Repeated non-compliance with RBI directions or reporting obligations.
- Weak governance, financial distress, or risk of depositor/investor harm. Before cancellation the regulator issues a show-cause notice offering the NBFC a chance to explain, but if the response is inadequate, cancellation follows.
Legal Framework Governing NBFC Registration and Appeal
Section 45-IA of the RBI Act, 1934, lays down the process for NBFC registration and conditions under which it can be cancelled. Notably, sub-section (7) of Section 45-IA grants the right of appeal to the Central Government. The legal scaffolding ensures that an NBFC whose registration is cancelled has recourse.
Right to Appeal Under the RBI Act
If your NBFC registration has been cancelled, you’re not without remedy. Under Section 45-IA(7), you can appeal to the Central Government within 30 days of the cancellation order. This appeal mechanism ensures regulatory oversight doesn’t become permanent without review.
Who Can File an Appeal and Time Limit
Only the NBFC which holds the registration that was cancelled may file the appeal, typically through authorised representatives. The key time limit: 30 days from receipt of the cancellation order. If you miss this, you may request condonation of delay — but it’s discretionary.
The Appellate Authority and Its Powers
The appellate body is the Central Government (via the Department of Financial Services / Ministry of Finance). Its powers include reviewing the cancellation order, calling for hearing, examining evidence, and either confirming, modifying or overturning the RBI’s decision.
Step-by-Step Procedure for Filing an Appeal
Here’s how to go about it:
Step 1 – Draft the Appeal: Address it to the Secretary, Department of Financial Services. It must mention your NBFC registration number, cancellation order reference, facts, reasons for appeal, and corrective measures taken.
Step 2 – Gather Supporting Documents: Include: copy of the cancellation order, audited financials, compliance certificates, board resolutions, evidence of remedial action, and correspondence with RBI.
Step 3 – File Within 30 Days: Mail or e-file as per applicable procedure. If you anticipate a delay, include a reason and supporting evidence.
Step 4 – Acknowledgement & Hearing Notice: Once submitted, you’ll get an acknowledgement. A hearing may be scheduled where you present your case.
Step 5 – Final Order: After hearing and review, the authority issues a written order. This decides whether your NBFC registration stays cancelled or is restored (possibly on conditions).
Hearing and Decision Process
The appeal hearing is where your arguments, documentation and corrective action are weighed. Both you (the NBFC) and the RBI may present viewpoints. The authority will assess if the cancellation was proportionate, lawful, properly communicated, and whether you’ve shown credible remedial steps. A fair hearing greatly strengthens your chances of restoration.
Outcomes After the Appeal
- If the appeal succeeds: your NBFC registration is restored. You may be required to meet additional conditions or submit ongoing compliance reports.
- If the appeal fails: cancellation stands. The NBFC must stop regulated business and may pursue judicial review via High Court only on narrow grounds of law or fairness.
- If modified: perhaps registration restored but only after fulfilling certain conditions.
Best Practices to Avoid Cancellation
From years of experience advising NBFCs, here are key practices:
- Maintain required NOF and other capital standards consistently.
- Submit all reports, returns and audits on schedule.
- Respond promptly to RBI inspections, queries or show-cause notices.
- Stick to permitted activities under your specific NBFC registration category.
- Set up strong internal controls and compliance frameworks.
- Engage experienced advisors to anticipate regulatory changes or gaps.
- If you detect non-compliance early, act immediately—not wait for a show-cause notice.
Recent Data on NBFC Registration Cancellations / Surrenders
Here’s the latest snapshot of how dynamic the space is:
- In September 2025, the RBI announced that 9 NBFCs surrendered their Certificates of Registration (CoR), including prominent names such as PhonePe Technology Services Private Limited and Aditya Birla Finance Limited. Concurrently, 31 NBFCs had their registrations cancelled. (Source: Moneylife / ET, Sep 13 2025) ETBFSI.com+1
- Earlier in 2025 (Feb), the RBI reported that 20 NBFCs surrendered their registration and 17 NBFCs had their CoRs cancelled. (Source: Business Standard, Feb 14 2025) Business Standard
- Official data from the Indian government portal (data.gov.in) shows year-wise cancellation figures for NBFCs whose CoRs were cancelled by the RBI in West Bengal; this gives a regional perspective on cancellations. Data.gov
What this means is: The regulator is actively reviewing and cleaning up NBFCs whose registrations are surrendered or cancelled — reinforcing the importance of compliance, governance and readiness to appeal when needed.
Call to Action
If your NBFC has received a cancellation order or you face the risk of cancellation of your NBFC registration, you don’t have to navigate this alone. At NBFC Advisory, we specialise in helping NBFCs with compliance reviews, appeal preparation under Section 45-IA(7), and representation before the RBI or the Department of Financial Services.
With over a decade of experience, we’ve guided numerous NBFCs through registration, renewal, appeal processes and regulatory remediation — getting them back to operational status with stronger governance.
👉 Get in touch today to assess your situation, map out your next steps, and start the appeal process with full confidence.
📞 Call NBFC Advisory: +91 93287 18979
🌐 Visit: www.nbfcadvisory.com
Frequently Asked Questions (FAQs)
What happens if my NBFC registration is cancelled by the RBI?
You must cease NBFC-regulated business immediately. You can file an appeal within 30 days.
Can I continue business while the appeal is pending?
No — once your NBFC registration is cancelled, you’re not allowed to operate as an NBFC until the order is reversed.
How long does the appeal process take?
It varies. With recent data showing multiple cancellations, the timeline depends on complexity. Estimate 2–3 months, but could be longer.
Can the RBI reconsider its cancellation before appeal?
Technically yes, if you proactively submit remediation details and engage. But you should not rely on this; filing the appeal is critical.
What documents are required for the appeal?
Cancellation order, appeal letter referencing your NBFC registration, audited accounts, compliance reports, evidence of remedial action, board resolutions, correspondence with RBI.
Can delay in filing the appeal be condoned?
Yes, on valid grounds, but it’s discretionary. Better to file within the 30-day window.
Should I hire a legal/advisory team for the appeal?
While not mandatory, engaging experienced NBFC advisory experts or legal counsel improves the chances of a successful restoration of your NBFC registration.
If my appeal fails, can I apply again for NBFC registration?
You may apply for fresh registration, but you’ll have to meet all eligibility criteria again and show prior issues are resolved.
How can my NBFC avoid cancellation in the first place?
By staying compliant: maintain NOF, submit timely audits and returns, adhere to permitted activities under your NBFC registration, respond to RBI notices, and keep governance standards high.
Who can assist with the appeal process?
An NBFC advisory firm (like ours), legal counsel with NBFC expertise, or consultants specialising in RBI regulatory compliance can guide you through drafting the appeal, handling documentation, and representation.
