A Non-Banking Financial Company, or NBFC, is how most of India's lending outside traditional banks actually happens — personal loans, vehicle financing, gold loans, microfinance, invoice factoring, and a large share of MSME credit all flow through NBFCs rather than banks. Unlike a bank, an NBFC doesn't need a banking licence, but it absolutely does need registration from the Reserve Bank of India before it can lend a single rupee.
At LegalDev, we help businesses through the entire NBFC registration journey — from structuring the Net Owned Funds correctly and selecting the right NBFC category, to preparing the business plan, filing through RBI's PRAVAAH portal, and coordinating with the RBI Regional Office until the Certificate of Registration is issued.
A Non-Banking Financial Company is a company registered under the Companies Act that is principally engaged in financial activities — lending, investing in shares and securities, leasing, hire purchase, insurance business, or chit-fund business — but does not hold a banking licence. NBFCs are regulated by the Reserve Bank of India under Chapter III-B of the RBI Act, 1934, a separate legal framework from the one governing banks (the Banking Regulation Act, 1949).
Two tests determine whether a company is treated as an NBFC for registration purposes — both must be satisfied:
If a company meets both conditions, it's classified as an NBFC and must register with the RBI before commencing business, regardless of how the company describes itself in its own documents.
Any company intending to carry on the business of lending, investment, leasing, hire purchase, or acquiring shares/securities/debentures as its principal business needs RBI registration before starting operations. This covers a wide range of business models: personal and business loan companies, gold loan providers, vehicle and equipment finance companies, microfinance institutions, invoice discounting and factoring businesses, and peer-to-peer lending platforms.
Certain categories are exempted from RBI's NBFC registration specifically to avoid duplicate regulation, since they're already regulated elsewhere:
The ₹10 crore figure that most people associate with "NBFC registration" applies specifically to the most common category — it isn't a universal number. Actual requirements vary by the type of NBFC being registered.
The ₹10 crore threshold for standard NBFCs was raised from the earlier ₹2 crore requirement, effective from October 1, 2022, as part of RBI's Scale Based Regulation reforms. New applicants have had to meet the full ₹10 crore threshold from inception since that date; NBFCs already registered before the change were given a phased timeline (₹5 crore by March 2025, ₹10 crore by March 2027) to build up to it.
Since we handle applications regularly, our team reviews the NOF structuring, category selection, and business plan before submission — this is where most delays and RBI queries typically arise when businesses apply on their own.
Since October 1, 2022, RBI regulates NBFCs through a four-layer framework, with compliance obligations increasing as an NBFC moves up the layers:
This is the most consequential change to NBFC regulation in several years, and it's worth understanding even if your business will still need full registration.
On April 29, 2026, RBI issued the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Amendment Directions, 2026, which took effect from July 1, 2026. The amendment splits all NBFCs into two categories:
The genuinely new development is this: entities that qualify as Type I and have an asset size below ₹1,000 crore can now apply to be classified as an "Unregistered Type I NBFC" — exempt from mandatory registration under Section 45-IA (and Section 45-IC, the reserve fund requirement) of the RBI Act altogether. To qualify, the entity's board must pass an annual resolution confirming it has no intention of accessing public funds or acquiring a customer interface, and must undertake to apply for full Type II registration immediately if that changes, or if assets cross the ₹1,000 crore mark, whichever happens first. RBI has also clarified that indirect access to public funds — for instance, routed through a group or associate entity — still counts as "public funds" for this test, closing an obvious loophole.
If you already hold an NBFC Certificate of Registration and believe you now qualify as an Unregistered Type I NBFC, RBI opened a one-time window to voluntarily surrender the CoR through the PRAVAAH portal, open until September 30, 2026. The surrender application needs three years of audited financials, a board undertaking on the entity's public-funds and customer-interface status, and physical submission of the original CoR to RBI. Submitting the surrender application doesn't automatically cancel the registration — RBI reviews it before confirming deregistration.
For most businesses reading this because they want to start lending to retail customers or the public, this update doesn't change your registration requirement — you'll still need full Type II registration with the standard NOF threshold. It matters most to holding companies, treasury vehicles, and group finance arms that have been carrying an NBFC registration mainly as a formality despite never touching public money or retail customers.
Getting the Certificate of Registration is the starting point, not the finish line. Ongoing obligations include:
Carrying on NBFC business without a valid Certificate of Registration is a serious regulatory violation, not a minor compliance lapse. Under Section 58B(5A) of the RBI Act, the consequences can include:
RBI has actively enforced this in recent years — in 2024 and 2025 alone, it cancelled the registration of more than 40 NBFCs for violations including failure to maintain the required NOF, non-submission of statutory returns, and non-compliance with the Fair Practice Code.
NBFC registration is one of the more document- and scrutiny-intensive licences in India — between structuring the NOF correctly, drafting a business plan that satisfies RBI's expectations, navigating the PRAVAAH portal, and managing the fit-and-proper review of directors, there's real value in getting it right the first time rather than responding to repeated RBI queries. Our team at LegalDev works through the full process — company incorporation, NOF structuring, category selection, PRAVAAH filing, and RBI correspondence — and continues supporting you afterward with the CRAR, returns, and Fair Practice Code compliance an NBFC needs to keep its licence in good standing.
Ready to start your NBFC journey? Get a free consultation to understand which NBFC category and capital structure fits your business.
The Reserve Bank of India, under Section 45-IA of the RBI Act, 1934 — not the Registrar of Companies. The RoC/MCA handles company incorporation itself, but the NBFC Certificate of Registration is issued separately by RBI.
₹10 crore in Net Owned Funds for a standard Investment and Credit Company or Factor — the most common category. Other categories have different thresholds: ₹5 crore for a microfinance institution, ₹2 crore for a P2P lending platform or Account Aggregator, and higher amounts (₹20 crore to ₹300 crore) for housing finance, infrastructure finance, and infrastructure debt fund categories.
An NBFC can carry on most lending and financing activities without holding a full banking licence, and it's regulated under the RBI Act, 1934 rather than the Banking Regulation Act, 1949. Unlike banks, most NBFCs cannot accept demand deposits (deposits withdrawable on demand, like a savings account), and they don't have access to the payment and settlement system in the same way banks do.
Typically 4 to 6 months from a complete application to the Certificate of Registration being issued, assuming documentation is in order and there are no material queries from RBI. The full process, including prior incorporation and arranging the capital, often takes 8 to 12 months for first-time applicants.
Possibly not, as of the framework that took effect on July 1, 2026. Entities that neither access public funds nor have any customer interface, and have an asset size below ₹1,000 crore, can apply to be classified as an "Unregistered Type I NBFC" and be exempted from mandatory RBI registration. This applies mainly to treasury vehicles, holding companies, and closed-group finance arms — not to businesses planning to lend to retail customers or the public.
It's a serious offence under Section 58B(5A) of the RBI Act, carrying imprisonment of up to 5 years and a fine of up to ₹25 crore, along with an additional daily penalty for continuing violations. RBI can also freeze the entity's bank accounts and publicly name it as an unauthorised entity.
Yes — since May 1, 2025, all NBFC registration applications go through RBI's PRAVAAH portal (pravaah.rbi.org.in). Most Regional Offices still ask for a physical copy of the signed application and supporting documents to be sent by post after the online submission.