Identification of principal business of nbfc

Hi,
RBI came out with a press release on April 08, 1999 inwhich it said that in order to identify identify a particular company as a non-banking financial company (NBFC), it will consider both, the assets and the income pattern as evidenced from the last
audited balance sheet of the company to decide its principal business. The
company will be treated as an NBFC if its financial assets are more than 50
per cent of its total assets (netted off by intangible assets) and income from
financial assets should be more than 50 per cent of the gross income. Both
these tests are required to be satisfied as the determinant factor for principal
business of a company.

Now my question is whether both these two tests (Assets and Income )should hold true for a company to qualify as NBFC or either one of them??

Secondly, does any fee income earned as a brokerage for arranging a loans qualify as "income from financial assets"??

Thirdly, does the fee income charged from an asset holder (lender) for servicing his loan (administering the repayments and helping in recovery)  qualify as "income from financial assets"??

rgds..

Replies (3)
Originally posted by : Gaurav Aggarwal

Hi,
RBI came out with a press release on April 08, 1999 inwhich it said that in order to identify identify a particular company as a non-banking financial company (NBFC), it will consider both, the assets and the income pattern as evidenced from the last
audited balance sheet of the company to decide its principal business. The
company will be treated as an NBFC if its financial assets are more than 50
per cent of its total assets (netted off by intangible assets) and income from
financial assets should be more than 50 per cent of the gross income. Both
these tests are required to be satisfied as the determinant factor for principal
business of a company.
Now my question is whether both these two tests (Assets and Income )should hold true for a company to qualify as NBFC or either one of them??

"Yes, Both tests to be fulfilled"


Secondly, does any fee income earned as a brokerage for arranging a loans qualify as "income from financial assets"??
Thirdly, does the fee income charged from an asset holder (lender) for servicing his loan (administering the repayments and helping in recovery)  qualify as "income from financial assets"??

"I think it will be considered, because your principal business is dealing with Financial Assets."


rgds..

Thanks for the reply, Rajesh

Hi,

 

One of our clients are a Section 25 company which implements internationally funded rural development projects. As a part of its one project, it has received certain funds for promotion of business enterprises in rural areas by way of financing equity, near equity or debt instruments. The company has created a separate fund for these financing. The company shall in no case achieve 50% critieria of asset or income since it does carry on several other activities and financing can not be said to be its principal business.

 

My question is whether the company is still required to get registered as NBFC?

Is it possible for the company to start financing enterprises without obtaining registration as NBFC?

If the registration is compulsory, then whether a separate company to function as NBFC would need to be floated to achieve 50% critiria?

Deepak Ghanshani

 

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
06 October 2026
Assistant Manager - Audit and Compliance

Ravi K Jain & Co

Noida

Others

View Details
Company
ARTICLESHIP 17 October 2026
Articled Assistant

RRPM & Associates LLP

Chennai

CA Inter

View Details
Company
Featured 03 October 2026
Accountant

A P Lodha and Associates

Jalna

B.Com

View Details
Company
07 October 2026
Senior Account Manager

Amplio Invest

Mumbai

M.Com

View Details
Company
23 October 2026
Sr. Accountant

SANKARAN & KRISHNAN

New Delhi

B.Com

View Details
Company
14 October 2026
Asst. Manager/Dy Manager (Costing)

manufacturing

Pune

CMA

View Details
Company
ARTICLESHIP 20 October 2026
CA ARTICLE

AMKN & CO

Noida

CA Inter

View Details
Company
ARTICLESHIP 07 October 2026
Article Assistant

Malhotra Rajesh & Associates

New Delhi

B.Com

View Details