RBI Draft Directions on NBFC Registration

Exemption Criteria

• The Reserve Bank of India (RBI) proposes to exempt certain non-banking financial companies (NBFCs) from registration.
• Criteria for exemption: 
  • NBFCs not availing public funds.
  • NBFCs without a customer interface.
  • Asset size of less than Rs 1,000 crore.
• These entities will be classified as "Unregistered Type I NBFCs".

Requirements for Larger NBFCs

• NBFCs with an asset size of Rs 1,000 crore or more must register as "Type I NBFC", even if they do not use public funds or have customer interactions.

Timeline and Procedures

• Existing NBFCs eligible for exemption can apply for deregistration by September 30, 2026.
• Applications for deregistration require: 
  • Submission via the ‘PRAVAAH’ portal.
  • Documents such as the certificate of registration, audited financial statements, and a statutory auditor’s certificate.
• Deregistration is contingent upon the RBI's satisfaction with the NBFC's business model.

Regulatory Framework

• Currently, NBFCs not using public funds and without customer interface are placed in the 'Base Layer' with relaxed regulatory requirements.
• The RBI's review considers these NBFCs' low-risk profile and peculiar business model.

Registration for Overseas Investments

• Unregistered Type I NBFCs engaging in overseas financial services investments need mandatory RBI registration and approval.
• Violations of registration requirements will incur penalties under the RBI Act, 1934.

Type II NBFC Registration

• NBFCs intending to access public funds or engage with customers must register as "Type II NBFC" before undertaking such activities to avoid penalties.