What is NBFC Loan And How To Register For NBFC?

NBFCs in India have been a strong pillar behind providing small-ticket loans and unsecured loans. According to media publications, the market value of investments of NBFCs is supposed to cross the ₹50 lakh crore mark by 2027, which is because of the rising demand of unsecured loans by NBFCs.

But what is NBFC loan?

Let’s simplify this first.

What is NBFC Loan?

An NBFC is a financial institution registered under the Companies Act, 2013, that offers several services similar to a traditional banking institution, but without any banking license. The credit facility that an NBFC offers with or without any collateral is known as an NBFC loan. The primary services that an NBFC offers are asset financing, lending unsecured loans, leasing, and security investment.

Also read why NBFCs are offering less loans under ₹50,000 and how loan protection insurance can help.

NBFCs Registered Under Which Act?

NBFCs are incorporated under the Companies Act, 2013, but fall under the regulatory ambit of the Reserve Bank of India as per Chapter IIIB of the RBI Act, 1934. Furthermore, it is mandatory for any NBFC to obtain a CoR with the RBI in terms of the Reserve Bank of India Amendment Act, 1997. RBI supervision ensures that while NBFCs function as companies, their financial activities remain under strict control and compliance parameters.

Who Is Eligible To Apply For NBFC Loan?

Now that we know what is NBFC loan is, we should understand who is eligible to apply for an NBFC loan. While there are no such strict guidelines for NBFCs not to lend towards any particular group, following the basic lending guidelines as set by the RBI is mandatory. This also makes NBFCs one of the easiest lending institutions in India. One can approach an NBFC for a collateral-free loan, depending on their CIBIL score, too, because of the low requirement of documents.

Also know the top government business loans for women entrepreneurs in India.

What Is The Registration Process of NBFC?

So far, we have learned what NBFC loan is, what different types of NBFCs are, and the different functions. Let's now understand the process of registration for NBFCs:

Step 1 - Register As a Company

First, get registered as a private or public limited company due to the requirement to register as an NBFC under Section 3 of the Companies Act, 2013. Also, you need to obtain a Certificate of Incorporation from the Registrar of Companies.

Step 2 - Own Minimum ₹10 Crore Fund

The minimum eligibility for NBFC registration is to show that the applicant has a net owned fund of ₹ 10 crores in any nationalized bank. In the case of an NBFC-IFC, it is ₹ 300 crores, and for a Mortgage Guarantee Company, it is ₹ 100 crores.

Step 3 - Deposit At Least ₹10 Crore With A Nationalised Bank

The next step in how to get NBFC license is that, as an applicant, you have to deposit a minimum of ₹10 crore in a Fixed Deposit of any nationalised bank.

Step 4 - Providing The Required Documents

The next step in this is to submit all the required documents, along with the FD receipt, to the RBI. You can apply online by visiting the official website of RBI or by visiting the RBI central office. Also, submit the e-form for registration, which you can download directly from the RBI website.

Step 5 - Track Your Application

You will receive an Application Reference Number (ARN), which will further help you to closely track your application.

What Documents Are Required To Register a NBFC?

You need to deposit these documents to procure an NBFC license:

• NBFC name and address with area pincode
• Certificate of Incorporation
• PAN Card/CIN of the applicant
• List of directors with their respective signatures
• Directors and auditors' report
• Audited balance sheet of the last 3 years
• Audited profit and loss account statement of the last 3 years
• Board resolution copy of business fair practices code compliance
• Board resolution copy stating the NBFC is not engaged in any financial activity without an NBFC license
• Board resolution copy that confirms the company does not hold/accept public deposits
• Statutory Auditors' certificate showing whether the company accepts/does not accept public deposits
• Statutory Auditors' certificate showing the company does not perform any NBFC activity
• Statutory Auditors' certificate that certifies the company’s net owned fund as of the date of application
• Self-attested documents that show bank statements for the last 2 years
• Documents of income tax returns report
• Copies of Memorandum of Association and Articles of Association
• Documents that clearly show the NBFC’s net owned funds and assets
• Copies of CIBIL score reports for every founder/director of NBFC

Also read the top 7 government subsidy loans for businesses in 2025.

What Are The Functions of NBFC?

There are several functions imposed on an NBFC; here are the major ones:

Offer Retail Credits

The surge in NBFC loans in India is because NBFCs offer retail credits without the complexity of too much paperwork. A retail credit can include any short-term loans, gold loans, and loans against property.

Hiring Purchase Services

NBFCs also offer purchase services as an asset financing option to buyers who use these assets and pay for their services. You can think of hiring purchase service as an asset rental service, whereby the buyer uses the asset or service and pays for their use.

Venture Capital Services

Many NBFCs also invest in venture capital services whereby they invest in businesses to gain more financial leverage. The negative side of these kinds of investments is that they are risky; however, they have better potential for returns.

Financially Support Infrastructure Projects

In some cases, such as REC Limited, a leading NBFC, and the Ministry of Power, have signed an MoU for the construction of renewable energy projects. Various NBFCs have previously assisted in the creation of major energy projects across India, too.

Manage Assets

NBFCs also act as asset management institutions, where there are dedicated fund managers for creating financially productive investments. The main purpose of the management of assets was to generate revenue from active investments, mainly in the mutual fund industry.

Who Regulates NBFC?

Under the RBI Act, 1934, the Reserve Bank of India is the major regulatory authority for NBFCs. As a central bank in India, the RBI enjoys comprehensive oversight over the country's financial system, from banks and NBFCs to foreign exchange management.

RBI 2025 Directives For NBFCs

On June 15, 2024, the regulatory framework for NBFCs underwent a significant transformation when the RBI issued a new Master Direction to minimise fraud for NBFCs. Here are the main propositions of the Master Direction statement:

• All the NBFCs with an asset size of ₹500 crore will set up a special committee of the Board for fraud monitoring, analysis, and suggest remedial measures to control fraud.
• NBFCs will set up a whistleblower policy for active fraud detection.
• NBFCs have to disclose the fraud amount as notes to accounts in their financial accounts.
• The required NBFCs will set up an organisational structure to maintain transparency.
• NBFCs in the upper and middle layers will have Early Warning Signals.
• The auditors should have due diligence, competency, and defined timelines for resolving any early warning signals.
• Borrower audits should be conducted per the loan agreement, and any delay or non-cooperation could lead to fraud classification.
• NBFCs must examine the fraud risk in group companies.
• NBFCs have discretion to lend after the cooling period.

What Are The Types of NBFC Loans?

Here are the major types of NBFCs that operate under the RBI’s supervision:

Asset Finance Companies

These lenders focus on providing credit for assets that are essential for businesses to operate. For example, if a financial institution offers credit for acquiring new machinery, that institution is an example of an asset finance company. The major purpose of these companies is to assist businesses in expanding, diversifying, and reducing asset constraints.

Loan Institutes

Loan institutes operate in the regular consumer and business lending space. They offer various types of loans that include personal loans, housing loans, education loans, and business term loans. These institutions are ideally fit for those who do not have access to a formal credit system due to paperwork or other reasons.

Infrastructure Finance Companies

An infrastructure company directly provides financial assistance for long-term infrastructure projects. They provide credit for building highways, power plants, airports, telecom networks, metro systems, and other heavy infrastructural projects. The feature of such a type of lending company is that they provide credits with long repayment cycles, which are utilised in developing projects.

Microfinance Institutions

The low and marginal-income earners of India are the major customer base of microfinance institutions. These companies offer microloans, such as loans that ideally range between ₹10,000 and ₹1 lakh, to individuals and businesses. These incisions are a major driver of financial inclusion in rural and semi-urban areas.

CIC-ND-SI

These are investment-oriented large NBFCs that hold 90% of their assets in the form of equity shares, preference shares, bonds, and debentures. These institutes are closely monitored and managed by RBI and usually invest in bank deposits, loans, and investments in debt issuance.

Conclusion

We have so far understood what is NBFC loan, the main requirements to register a NBFC with the RBI, and know the different types of NBFCs in India. The Indian market is largely served by the NBFCs because of a demand for unsecured loans and small-ticket loans. However, recently, the RBI has tightened the process of credit extension by NBFCs, which made the process of lending more secure and regulated. NBFCs still drive the growth engine in the Indian economy and serve credit for a varied range of income groups, as well as small businesses.