Necessity of forming an NBFC

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Gaurav Aggarwal (Querist)
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06 April 2009 My question is:

"What mandates a body (individual/partnership firm/company) to form an NBFC??"

Should an arranger of loans such that he brings together a borrower and desirous lenders together and gets the deal done required by law to get registered as an NBFC or is there any other regulation governing it??

For example, a borrower intends to borrow Rs.50,000 and reading this borrower's profile in a brochure carried by an arranger(intermediary) there are 10 people ready to lend 5000 each? In arranging this deal is the intermediary mandated to be registered as an NBFC with RBI or as a money lender with the State or anythign else??

A related question ..

Am I as an individual required by law to be registered in any form if I intend to lend some money to a friend or for that matter any individual I m comfortable with?? I do not want to carry it on as business. The intention is to help the other individual and supplement the income that I earn from my occupation. If I get a promissory note signed, would that be enfoceable at law in the event of the borrower not paying back the borrowed money??

Jagruti (CS)

Jagruti (CS) (Expert)
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07 April 2009 "Non Banking Financial Company" (NBFC) means:
- a financial institution which is a company.
- a non - banking institution which is a company and which has as its principal business the receiving of deposits or lending in any manner.
- such other non - banking institution as may be notified by CG.

where Fianancial Institution is defined under Sec 45-I of RBI Act, 1934.

therefore, only borrowing for one time it does not become NBFC. Only if Co's main object is borrowing and lending than NBFC act applies.

According to RBI Sec 45 I, NBFC IS a Co., Corporation,ore co operative society. So NBFC is not applicable 2 Individual

Gaurav Aggarwal

Gaurav Aggarwal (Querist)
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07 April 2009 Thanks for the prompt reply..
However, I have a further question .. going by your reply can we say if the objective of a body is facilitating lending and borrowing between individuals, it need not get registered as an NBFC .. right??

Jagruti (CS)

Jagruti (CS) (Expert)
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08 April 2009 if the objective of a body is facilitating lending and borrowing between individuals, may be NBFC. But check the all criteria.

Non Banking Financial Company" (NBFC) means:
- a financial institution which is a company.
- a non - banking institution which is a company and which has as its principal business the receiving of deposits or lending in any manner.
- such other non - banking institution as may be notified by CG.

And criteria for registration is Confirm whether, before commencing or carrying on the business of NBFC:
(a) the company has obtained Certificate of Registration (CoR)
from RBI and
(b) Net Owned Fund (NOF) is maintained at Rs. 2 crores or more

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