Regarding formation of a consumer finance company

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Pravesh Jain (Querist)
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14 September 2014 I WANT TO FORM A PVT. LTD OR FIRM WHOSE OBJECT IS TO FINANCE CONSUMER GOODS.
WHETHER NBFC PROVISIONS WILL BE APPLICABLE.IF YES THEN, ANY ALTERNATIVE SOLUTIONS TO BYPASS NBFC NORMS/PROVNS

KINDLY HELP

Nikhil Kaushik

Nikhil Kaushik (Expert)
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15 September 2014 NBFC provisions will apply. please aim at compliance instead of evasion

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Pravesh Jain

Pravesh Jain (Querist)
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17 September 2014 we dont want to evade sirji...but is there any legal way to bypass it

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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20 July 2025 Regarding your question on forming a Pvt. Ltd. company or firm for financing consumer goods and whether NBFC provisions will apply:

Will NBFC provisions apply?
Yes. If your primary business involves financing consumer goods, loans, or credit, your company will likely fall under the definition of an NBFC (Non-Banking Financial Company) as per RBI regulations.
NBFC regulations will apply if your financial activities meet the criteria set by RBI (e.g., accepting deposits, lending money, etc.).
Is there a legal way to bypass NBFC registration and norms?
Generally, no. If you are engaged in financial activities like lending or hire purchase financing, you must comply with NBFC registration and regulatory requirements.
Attempting to bypass NBFC norms by structuring the business differently can lead to legal complications, penalties, or business risks.
Possible alternatives:
Partner with an NBFC or bank: Instead of directly financing, act as a broker or referral agent to NBFCs/banks.
Operate purely as a trading company: Sell goods on outright sale basis without financing or credit facility.
Limit financial activities: Avoid accepting deposits or providing credit for consumer goods, so the company is not categorized as NBFC.
Microfinance / small loans: If targeting microfinance, different registration rules may apply, but still regulated.
Summary:
If you plan to finance consumer goods through loans or credit, you will have to comply with NBFC regulations.
Instead of seeking ways to bypass, it’s better to design the business model in compliance with RBI and legal norms.

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