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At NBFC Advisory, we’ve seen firsthand how rapidly the financial landscape is evolving, particularly in 2024, as the demand for credit in India continues to surge. As we navigate through these times, setting up an NBFC-Investment and Credit Company (NBFC-ICC) has become more appealing for businesses wanting to provide financial services without a full banking licence.
In this updated guide, I’ll walk you through everything you need to know, including the latest NBFC registration process, updated compliance requirements, and the capital regulations for 2024. Let’s get started!
What is an NBFC-ICC?
An NBFC-ICC (Non-Banking Financial Company-Investment and Credit Company) is a type of non-banking financial institution that focuses on providing loans, advances, and credit facilities, as well as making investments in securities and other marketable instruments. With the continued growth in India’s economy, 2024 is proving to be a crucial year for NBFCs, especially as demand for quick and easy credit rises.
While NBFC-ICCs are not authorised to take public deposits, they have become the go-to choice for businesses looking to lend without the full regulations required of traditional banks. However, they must follow the updated compliance rules and guidelines issued by the Reserve Bank of India (RBI) in 2024.
Key Features of NBFC-ICCs
Lending and Investment: The primary business activity remains providing loans and making investments.
No Banking License Required: NBFC-ICCs operate without a full banking license but must register with the RBI.
No Deposit-Taking: They are not allowed to accept public deposits, which distinguishes them from deposit-taking NBFCs.
The Updated NBFC Registration Process for ICC in 2024
The NBFC registration process has become more streamlined in 2024, thanks to the RBI’s efforts to make the financial sector more transparent and efficient. Here’s an updated step-by-step guide for businesses looking to start an NBFC-ICC:
Step 1: Incorporate Your Company
Your first step, as always, is incorporating your business under the Companies Act, 2013. Your company must be either a private limited or a public limited entity to qualify for NBFC registration.
Step 2: Meet the Minimum Capital Requirement (Updated for 2024)
To proceed with the NBFC registration process, you are now required to have a Net Owned Fund (NOF) of ₹10 crores. This increase from previous years ensures that all registered NBFC-ICCs have the financial strength to meet liabilities and handle market risks more effectively.
Step 3: Submit Your Application to the RBI
In 2024, the application submission process is completely digital through the RBI’s online portal.
Along with the necessary forms, you must submit the following documents:
- A detailed business plan outlining your company’s operations
- KYC documents for all directors and shareholders
- Audited financial statements
- Certificate of incorporation from the Ministry of Corporate Affairs
Step 4: Compliance with Updated RBI Guidelines
With compliance becoming stricter in 2024, it is crucial to ensure that your business meets all of RBI’s guidelines, including capital adequacy, financial reporting, and risk management practices.
Step 5: RBI Approval
After the submission of all documents, the RBI will carefully review your application. The approval process can take several months, so it’s essential to have everything in place. At NBFC Advisory, we help companies navigate this process smoothly and efficiently.
Compliance Requirements for NBFC-ICCs in 2024
Compliance in 2024 has evolved to address the growing complexities of the Indian financial system. As an NBFC-ICC, staying compliant is not only crucial for maintaining your license but also for staying competitive.
Here are the key compliance requirements you must meet in 2024:
- Capital Adequacy Ratio (CAR): As of 2024, NBFC-ICCs are required to maintain a CAR of 17%, a slight increase from previous years to ensure better financial health and risk management.
- Financial Reporting: Regular submission of audited financial statements to the RBI is mandatory. These reports should now include more granular details on your loan portfolios and risk management strategies.
- Asset Classification and Provisioning: NBFC-ICCs must adhere to stricter asset classification norms, ensuring that non-performing assets (NPAs) are recognized sooner, with provisioning guidelines updated to reflect the current financial landscape.
- Risk Management: 2024 has brought renewed focus on implementing robust risk management frameworks, especially concerning credit, operational, and market risks.
At NBFC Advisory, we have helped clients stay ahead of compliance requirements by building systems that automatically track and report on these key areas.
Regular RBI Inspections in 2024
RBI inspections in 2024 are more frequent and focused on ensuring that NBFCs are operating within the regulatory framework. Inspections now include a detailed review of both financial and operational aspects, with a focus on risk management practices.
Why Set Up an NBFC-ICC in 2024?
In 2024, starting an NBFC-ICC can be an excellent opportunity for businesses looking to capitalize on the growing demand for credit in India. Here’s why it’s worth considering:
- Increased Demand for Credit: With India’s economy continuing to expand, there is a significant need for credit among SMEs and individuals who may not qualify for traditional bank loans. NBFC-ICCs are well-positioned to meet this demand.
- Operational Flexibility: While regulatory requirements have tightened, NBFCs still enjoy more operational freedom than traditional banks, allowing them to be more agile in meeting customer needs.
- Technological Innovation: NBFC-ICCs are increasingly leveraging fintech solutions to enhance their credit offerings. As we move further into 2024, technology will continue to drive efficiency in the lending process.
- Lower Regulatory Burden: Although compliance has been enhanced, NBFC-ICCs are still subject to fewer restrictions than banks, making them a more flexible and viable option for many businesses.
Conclusion
Setting up an NBFC-ICC in 2024 offers exciting opportunities, but it requires a deep understanding of the NBFC registration process and the latest compliance regulations. At NBFC Advisory, we are here to guide you every step of the way, ensuring that your company is set up for success and stays compliant with the latest RBI guidelines.
If you’re considering starting an NBFC-ICC or simply need assistance navigating the complex regulatory landscape, don’t hesitate to reach out. We’re here to help you make informed decisions and achieve your business goals in 2024 and beyond.
