Do you want to start a loan company in India? Many people do. The lending business is growing fast. But before you start giving out loans, you need a license from the Reserve Bank of India (RBI). Without it, you cannot legally operate.
This guide explains everything you need to know — in simple words. We cover what a loan company is, why you need a license, what type of license to get, the eligibility rules, the documents needed, and the step-by-step process. We also share the latest 2025–2026 RBI updates so you stay fully informed.
What is a Loan Company?
A loan company is a business that lends money to people or other businesses. The borrower agrees to pay back the money over time, usually with interest. The loan company earns its income from that interest.
In India, a loan company is treated as a type of Non-Banking Financial Company, or NBFC. An NBFC is a company that does financial work — like lending money or investing — but is not a bank.
Some well-known loan companies in India include Bajaj Finserv, Muthoot Finance, Tata Capital, and L&T Finance. These are all registered NBFCs.
Key Point: A loan company is not the same as a bank. It cannot accept savings deposits like a bank can, but it can lend money to customers. See RBI’s NBFC page: rbi.org.in/commonman/English/scripts/NBFCs.aspx
Why is the Lending Business Growing in India?
India has a huge need for credit. Millions of people need loans for everyday needs — medical emergencies, education, weddings, home repair, or starting a small business. Many banks do not reach rural or semi-urban areas. NBFCs step in to fill this gap.
Here are some numbers that show how big this sector is:
- Total NBFC assets crossed ₹45 Trillion in 2025
- The sector is expected to grow at 16% per year between 2026 and 2030
- About 72% of young Indians prefer digital lending platforms
- NBFCs could handle 50% of all bank credit by 2047
This growth makes starting a loan company a smart business move — if done correctly and legally.
What License Do You Need?
To start a loan company in India, you need an NBFC License from the Reserve Bank of India (RBI). This license is officially called a Certificate of Registration, or CoR.
The RBI gives this license under Section 45-IA of the Reserve Bank of India Act, 1934. You can read the full Act and related directions on the official RBI website: www.rbi.org.in. You cannot legally lend money as a business without this CoR.
Types of NBFC Licenses for Loan Companies
The RBI classifies NBFCs by what they do and how big they are. For a loan company, the most relevant types are:
| NBFC Type | What It Does |
| NBFC-ICC (Investment & Credit Company) | Gives loans, invests in shares, and does asset financing. This is the most common type for a loan company. |
| NBFC-MFI (Micro Finance Institution) | Gives small loans (microloans) to low-income groups without requiring collateral. Minimum NOF: ₹5 crore. |
| NBFC-P2P (Peer-to-Peer Lending) | Runs an online platform where individuals lend to and borrow from each other. |
| NBFC-Factor | Buys unpaid invoices from businesses and collects payment from their customers. |
| NBFC-IFC (Infrastructure Finance Company) | Focuses on lending for infrastructure projects like roads and power plants. |
If you want to start a general loan business, apply for an NBFC-ICC license. Full definitions are in the RBI Master Directions: rbidocs.rbi.org.in — Master Directions
RBI’s New 2025–2026 Regulatory Updates
The RBI made important changes to the NBFC rules in 2024–2026. Every loan company owner must know these updates.
PRAVAAH Portal Replaces COSMOS (May 1, 2025)
This is the biggest change for new applicants. From May 1, 2025, all NBFC registration applications must be filed through the RBI’s new PRAVAAH portal — not the old COSMOS portal. PRAVAAH stands for ‘Platform for Regulatory Application, Validation and Authorisation.’ You can access it at: pravaah.rbi.org.in
The PRAVAAH portal was launched on May 28, 2024, and became mandatory for NBFC registration from May 2025. It allows online submission of applications, document upload, and real-time tracking of your application status.
New Amendment Directions, 2026 (Effective April 1, 2026)
In late 2025, the RBI introduced the NBFC Registration, Exemptions, and Framework for Scale Based Regulation Directions, 2025. This was amended in early 2026 with the Amendment Directions, effective from April 1, 2026.
The big change: The RBI created a new category called ‘Unregistered Type I NBFC.’ These are companies that:
- Do not raise money from the public (no public funds)
- Do not interact with any outside customers
- Have total assets below ₹1,000 crore
Such companies are now exempt from mandatory registration. They are essentially private investment vehicles — not loan companies that serve public borrowers.
This rule does NOT affect you if you plan to lend to customers. Loan companies that serve the public still need full NBFC registration with CoR from RBI.
Scale-Based Regulation (SBR) Framework
The RBI now regulates NBFCs in four layers based on their size and risk. This framework was introduced via RBI Circular dated October 22, 2021.
Read the full circular here: RBI SBR Circular
- Base Layer — Small NBFCs with assets below ₹1,000 crore. Simpler rules apply.
- Middle Layer — Deposit-taking NBFCs and NBFCs doing specific activities. Stricter rules.
- Upper Layer — Large NBFCs identified by the RBI. Very strict oversight.
- Top Layer — The top 10 NBFCs by asset size. Maximum oversight.
As a new loan company, you will start in the Base Layer. As you grow, the RBI will move you to higher layers with more rules to follow.
NPA Classification Update
The RBI changed how Non-Performing Assets (NPAs) are counted. A loan is now classified as an NPA when it is overdue for more than 90 days. This rule now applies to all NBFCs, regardless of size or layer.
Key Facts Statement (KFS) Requirement
NBFCs must now provide every borrower with a Key Facts Statement before the loan is finalised. The KFS must clearly show:
- The rate of interest being charged
- All fees and charges
- The method used to calculate interest
- Grievance redressal contact information
This rule promotes transparency and protects borrowers from hidden charges.
Gold Loan LTV Ratio Update (June 2025)
For NBFCs giving gold loans, the RBI updated the Loan-to-Value (LTV) ratios in June 2025:
- Loans up to ₹2.5 lakh: LTV up to 85% (up from 75%)
- Loans between ₹2.5 lakh and ₹5 lakh: LTV up to 80%
Gold loan NBFCs had until April 1, 2026 to fully implement these changes.
Deregistration Window for Certain NBFCs
Existing registered NBFCs that now qualify as Unregistered Type I can surrender their Certificate of Registration by September 30, 2026, via the PRAVAAH portal. Read the RBI circular here: CoR Surrender Circular – Sep 2025
Who Can Apply? Eligibility for an NBFC License
Not everyone can apply for a loan company license. Here are the rules set by the RBI:
- You must be a registered company. Individuals cannot apply. You must first set up a Private Limited or Public Limited Company under the Companies Act, 2013.
- The company directors must be at least 18 years old.
- At least one-third of the board of directors must have prior experience in finance (banking, credit, risk, or retail operations — ideally 10+ years).
- The company must have a Minimum Net Owned Fund (NOF) of ₹10 crore. This is the minimum for NBFC-ICC and most other types.
- The application must be submitted through the RBI’s PRAVAAH portal (pravaah.rbi.org.in).
- The company must have a detailed business plan covering the next 3 to 5 years.
- No director should have been convicted of any financial crime or fraud.
- The company must not have accepted public deposits before receiving RBI approval.
Net Owned Fund (NOF) = Paid-up capital + Free reserves − Accumulated losses − Intangible assets. For full official definition, see: RBI NBFC FAQs
Documents Required
You must collect and prepare the following documents before filing your application on the PRAVAAH portal:
Company Documents
- Certificate of Incorporation (from Registrar of Companies via MCA portal)
- Certificate of Commencement of Business
- Memorandum of Association (MoA) — must include financial activities as the main objective
- Articles of Association (AoA)
- Copy of Company Identification Number (CIN)
- Copy of Company’s PAN Card
Financial Documents
- Audited Balance Sheets for the last 3 years
- Statutory Auditor’s Certificate confirming the Net Owned Fund (NOF) of at least ₹10 crore
- Fixed Deposit receipt & Banker’s Certificate confirming no lien on NOF
- Business Plan for the next 3 to 5 years, including financial projections and risk management policies
Director-Related Documents
- CIBIL Credit Data for all directors and significant shareholders
- Certified copy of the Board Resolution authorising the NBFC application
- Banker’s report for the company, directors, subsidiaries, and associated entities
- Director profiles: DIN, DSC, PAN, KYC (identity proof, address proof, photographs)
- IT infrastructure details (hardware, software, latest internal system audit report if applicable)
All documents must be in PDF format, clearly named, and under 2 MB per file for the PRAVAAH portal.
Step-by-Step Process to Get Your Loan Company License
Step 1: Register Your Company with ROC
Register a Private Limited or Public Limited Company under the Companies Act, 2013. Go to the MCA Portal (www.mca.gov.in) and file the SPICe+ form. Once approved, the Registrar of Companies (ROC) will give you a Certificate of Incorporation. Make sure your MoA states financial service activities as the main objective.
Step 2: Open a Bank Account and Build Your Capital
You need to show a Net Owned Fund of at least ₹10 crore before applying. This must be equity capital — not loans or borrowed funds. Deposit this into the company’s bank account in a fixed deposit. Get a Banker’s Certificate and a Statutory Auditor’s NOF Certificate.
Step 3: Prepare All Required Documents
Collect and certify all the documents listed in Section 6 above. Double-check every document for accuracy. Prepare a strong 5-year business plan that shows the RBI you have a clear vision — include market research, risk policies, projected P&L, and capital planning.
Step 4: File the Application on the PRAVAAH Portal
Go to the RBI’s PRAVAAH portal: pravaah.rbi.org.in. Register your company, select ‘NBFC Registration’ under Non-Banking Financial Company, fill out the application form (NBS-1), upload all documents, and pay the non-refundable application fee of ₹3 lakh. You will receive an acknowledgment number to track your application.
Step 5: Send Hard Copy to RBI Central Office
After online submission, send a physical copy of the application with all attachments to: CGM, Department of Regulation, Reserve Bank of India, Central Office, Mumbai — 400 001.
Step 6: RBI Review and Approval
The RBI’s Department of Non-Banking Supervision (DNBS) will review your application. They may ask for clarifications. If everything is in order, you will receive your Certificate of Registration (CoR) — your official NBFC License.
For full process details, see the RBI NBFC FAQs.
After You Get the License — Key Compliance Rules
Getting the license is just the beginning. Once you are an NBFC, you must follow ongoing rules from the RBI:
- File quarterly CAR (Capital Adequacy Ratio) Reports — on 31st March, 30th June, 30th September, and 31st December.
- File loan securitisation and borrowing compliance reports on 30th April and 31st October every year.
- Maintain the minimum NOF of ₹10 crore at all times.
- Classify loans as NPAs if overdue for more than 90 days.
- Provide every borrower with a Key Facts Statement before the loan is finalised.
- Maintain a public grievance redressal system.
- Do not accept demand deposits from the public.
- Follow Know Your Customer (KYC) norms at all times
- Report large exposures and related party transactions to the RBI.
All ongoing compliance guidelines are available at www.rbi.org.in under Notifications. Failing to comply can result in fines or cancellation of your NBFC license.
Quick Summary Table
| Factor | Factor Details |
| License Required | NBFC Certificate of Registration (CoR) from RBI |
| Governing Law | RBI Act, 1934 — Section 45-IA |
| Applicant Type | Companies only (Pvt. Ltd. or Public Ltd.) |
| Minimum Capital (NOF) | ₹10 crore (equity capital, not borrowed) |
| Application Portal | PRAVAAH Portal: pravaah.rbi.org.in |
| Typical Timeline | 4 to 6 months |
| Most Common License Type | NBFC-ICC (Investment and Credit Company) |
| NPA Classification Rule | Overdue for more than 90 days |
| Key 2025 Update | COSMOS replaced by PRAVAAH (from May 1, 2025) |
| Key 2026 Update | New Unregistered Type I NBFC category (private entities, no customer interface) |
Common Mistakes to Avoid
- Not maintaining the minimum NOF of ₹10 crore in equity before applying.
- Using the old COSMOS portal — all applications now go through PRAVAAH (pravaah.rbi.org.in).
- Filing an incomplete or incorrect application — the most common reason for rejection.
- Not having at least one-third of directors with finance experience.
- Submitting a weak or vague 5-year business plan.
- Starting to lend money before the CoR is granted — this is illegal.
- Ignoring quarterly compliance reporting obligations after receiving the license.
- Documents over 2 MB per file or in wrong format — rejected on PRAVAAH portal.
Conclusion
Starting a loan company in India is a real business opportunity. The demand for credit is growing every year, and NBFCs are at the heart of India’s financial system.
But you must follow the rules. The key license you need is the NBFC Certificate of Registration from the Reserve Bank of India. Before you apply, your company must be incorporated, your capital must be in place, and your documents must be ready.
From May 2025, all applications are filed on the PRAVAAH portal (pravaah.rbi.org.in). The 2025–2026 RBI updates bring new categories, a new portal, updated NPA rules, and clearer compliance guidelines. Staying informed and compliant is not just a legal need — it builds trust with borrowers and helps your business grow long-term.
For all official information, always refer to the RBI’s official website: www.rbi.org.in.
If you want expert support with NBFC registration, licensing, and ongoing compliance, connect with NBFC Advisory to get started smoothly and avoid costly mistakes.
Get in touch with our consultants today.
📞 Call NBFC Advisory: +91 93287 18979
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