Overview of RBI Compliance Checklist for NBFC
Similar to banks, the RBI also has certain regulations for NBFCs. But these regulations keep on altering based on the circumstances and situation.
It is important for the management and running of an NBFC to be well aware of these regulations and stay abreast with them.
As per the Reserve Bank of India (RBI) guidelines, non-banking financial companies (NBFCs) are required to comply with certain annual requirements in order to operate legally in India. These requirements include:
- Submission of Annual Financial Statements: NBFCs must submit their annual financial statements, including the balance sheet and profit and loss account, to the RBI within six months from the end of the financial year
- Filing of Annual Returns: NBFCs must file an annual return with the RBI within 30 days from the end of the financial year. The return must contain details of the company's financial position, business, and operations
- Submission of Statutory Audit Report: NBFCs must get their accounts audited annually by a chartered accountant. The audit report must be submitted to the RBI within three months from the end of the financial year
- Submission of Statutory Liquid Assets: NBFCs must maintain a certain percentage of their net demand and time liabilities as statutory liquid assets, as prescribed by the RBI. They must submit a statement of statutory liquid assets to the RBI within 15 days from the end of each quarter
- Compliance With the Fit and Proper Criteria: The RBI has prescribed certain fit and proper criteria for appointing directors and key managerial personnel in NBFCs. NBFCs must ensure that they comply with these criteria at all times
- Compliance with Other Regulations: NBFCs must also comply with other regulations and guidelines issued by the RBI from time to time, such as those related to customer protection, asset classification and provisioning, and capital adequacy.
Types of NBFCs
NBFCs are divided based on activities and liabilities:
Based on Liabilities
- Deposit accepting NBFCs
- Non-deposit accepting NBFCs
Based on Activities
- Infrastructure Debt Fund NBFC (IDF-NBFC)
- Investment and Credit Company (ICC)
- Non-Operative Financial Holding Company (NOFHC)
- Microfinance Companies (MFIs)
- Mortgage Guarantee Companies
- Infrastructure Finance Company (IFC)
- Core Investment Company (CIC).
Compliances That Every NBFC Needs to Follow
Annual Compliance
| Particulars | Timeline |
|---|---|
| Unaudited March Monthly return/NBS7 | By 30 June |
| Audited March Monthly return/NBS7 | Upon completion |
| Statutory Auditors certificate on Income & Assets | By 30 June |
| Information about Cos having FDI/Foreign Funds | By 30 June |
| Resolution of Non-acceptance of Public Deposit | Before the start of the new Financial year |
| File Audited Annual Balance Sheet and P&L Account | One month from the date of signoff |
| Declaration of Auditors to Act as Auditors of the Company | Annually |
Monthly Compliance
| Particulars | Time Limit |
|---|---|
| Monthly Return | It must be done on the 7th of every month |
Periodical Compliances
| PARTICULARS | TIME LIMIT |
|---|---|
| Director’s Appointment | Within 30 days of appointment |
| Resignation of Director(DIR-12 + Challan Receipt) | Within 30 days of resignation |
| Adoption of any notification in the ensuing Board Meeting & filing the certified copy with RBI |
Overview of the Different Types of Returns Filed by NBFCs with the RBI
- NBS-1 Return: NBFCs that hold public deposits must submit this return every quarter. The objective is to capture financial details like profile and loss, exposure to sensitive sectors, etc.
- NBS-2 Return: NBFCs accepting public deposits must submit this return quarterly on Prudential Norms. The objective is to capture compliances related to different prudential norms.
- NBS-3 Return: This is also a quarterly return which every NBFC needs to file. This return has information pertaining to statutory investment in liquid states.
- NBS-4 Return: Any rejected company holding public deposits must file this return. It is an annual return. Earlier rejected companies used to file NBS-5, but now it has been changed to NBS-4
- NBS-6 Return: This is a monthly return filed by NBFCs taking deposits with total assets equal to or more than ₹100 crores
- Half-Yearly ALM Returns: NBFCs taking public deposits of more than ₹20 crores must file this return. Also, their asset size is more than ₹100 crores
- Audited Balance Sheet and Auditor’s Report: This is yet another report that NBFCs need to file
- Branch Information Return: It is a quarterly return that every NBFC accepting public deposits must submit.
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FAQs on Annual Compliance of NBFCs with RBI
Financial activity as a principal business is when a company's financial assets constitute more than 50% of the total assets, and income from financial assets constitutes more than 50% of the gross income. A company that fulfils these criteria will be registered as NBFC by RBI.
For instance, non-deposit-taking NBFCs have no cash reserve ratio (CRR) requirement, nor are they required to maintain a statutory liquidity ratio (SLR). And though deposit-taking NBFCs are subject to some restrictions on branch expansion, exposure to capital markets, and real estate, they benefit from regulatory forbearance in the form of a lower SLR: 15% against 24% for banks.
The Reserve Bank of India (RBI) on Thursday allowed banks and non-banking financial companies (NBFCs) to restructure personal loans, including granting the borrower a moratorium.
Yes, an NBFC can outsource its annual compliance requirements to a third party, such as a law firm or accounting firm, to assist with the compliance process.
Yes, all NBFCs must undergo an annual audit per the RBI guidelines.
