NBFC Compliance

Recently, NBFC RBI compliance has become increasingly challenging. Banks used to receive benefits from non-banking financial institutions. There was a time when NBFC compliance was far more lax, but following the Sahara case, RBI revised NBFC compliance and continued to screen them. A few of the crucial regulations are guidance for NBFC private placements and the securitization of common assets. RBI keeps putting out initiatives to counter theory in NBFCs.

Non-Banking Financial Firms are incorporated under the 2013 Companies Act and are in the business of obtaining deposits, loans, and advances as well as purchasing government-issued debentures, securities, and stocks, bonds, and other financial instruments. The NBFCs are registered and actively involved in the financial operations of Reserve Bank of India. Without getting a license from the Reserve Bank of India, no NBFC can run its business.

The most important requirements for adhering to NBFC Compliances

The Reserve Bank of India has switched from the COSMOS platform to the XBRL system for the current online supervisory return filing process. Therefore, in order to file returns on the brand-new XBRL platform, NBFCs must possess the following:

  • obtain from RBI the User ID and Password;
  • It is need to install the XBRL RBI Ifile.
  • Regularly update your profile on the XBRL portal.

Types of NBFCs: NBFC Compliance and Returns

In order to focus on particular industries or classes, NBFCs have been categorised as a result of their expansion and growth. All of these NBFCs are required to maintain strict adherence to the rules established by the regulatory authority. Each NBFC category has been covered below.

NBFCs can be grouped into:

  • According to their activity;
  • according to liabilities.

Based on their activity, NBFCs

  • Investment and Credit Company: This business primarily finances business assets by disbursing credit. After the RBI decided to combine 3 NBFCs, namely Asset Business, Investment Company, and Loan Company into one, the category of investment and Credit Company was created
  • Mortgage Guarantee Company: A mortgage guarantee company is an NBFC whose mortgage guarantee business accounts for at least 90% of the Micro Finance Company’s (MFC) business turnover or at least 90% of the Micro Finance Company’s (MFC) gross income, and whose MFC’s net owned fund is at least Rs. 100 crore.
  • Infrastructure Finance Company: A corporation known as an infrastructure finance company invests at least 75% of its total assets in infrastructure loans. It has a CRAR of 15% and a minimum net-owned fund of 300 crores.
  • Non-Operative Financial Holding Company (NOFHC): Any promoter or group of sponsors may establish a new bank through NOFHC. This particular sort of NBFC holds banks and other financial companies that are under the control of the RBI or other financial sector regulators to the extent permitted by the relevant regulatory recommendation.
  • Micro-Finance Company: These businesses carry out tasks precisely like banks do. Small enterprises that are underserved or underqualified for loans are given loans by them
  • NBFC factors: This kind of NBFC is involved in the factoring industry. These are referred to as NBFC factors, and at least 50% of its total assets must be made up of financial assets.
  • Infrastructure debt fund NBFC: This kind of NBFC specializes in the simplification of long-term debt. Only the infrastructure financing firm is able to provide funding for it.
  • NBFC Account Aggregator: A non-banking financial firm (NBFC) that has a license from the Reserve Bank and engages in offering services such the retrieval or collecting of financial data relevant to the financial assets of its clients is known as an account aggregator.
  • NBFC P2P: Using a digital platform, the NBFC P2P lending network connects lenders and borrowers. NBFC P2P has reduced the burdensome loan processing process and, to a certain extent, making it easier.
  • HFCs: HFCs are NBFCs whose main line of business is to finance the purchase or building of homes.

NBFCs based on their Liabilities-

  • Deposit-taking NBFCs;
  • Non-Deposit Taking NBFCs.

Non-deposit-taking NBFCs are further classified into-

  • Systematically important NBFCs;
  • Others

Key NBFC Compliance Checklist for Non-Deposit and Deposit Company

Different NBFC Compliances and Returns (Annual, Monthly and Quarterly)

MONTHLY COMPLIANCES

S.No Form Type of NBFC Description Due Date
1

 

DNBS-04B Return Structural Liquidity & Interest Rate Sensitivity  

 

 

 

NBFCs-D and NBFCs-NDSI

To capture-

 

 (i) The details of mismatch in the projected future cash inflows & outflows based on maturity pattern of assets & liabilities at the end of reporting period for NBFCs-NDSI;

 

(ii) The details of interest rate risk.

 

 

 

 

Within 10 days from the end of every month

2

 

CIC Reporting All NBFCs Every NBFC shall require to report its loans to all four CICs On and before 10th day of succeeding month
3. NESL ALL NBFCs All are required to report its financial debt to NESL Within a week from the date of succeeding month

QUARTERLY COMPLIANCES

S.No Form Type of NBFC Description Due Date
 

 

 

1

 

 

DNBS-01 Return NBFCs-D and NBFCs-NDSI The return captures financial details, viz. components of Assets as well as Liabilities, Profit & Loss account, Exposure to sensitive sectors etc. for NBFC-D & NBFC-NDSI 15th April;

15th July;

15th October;

15th January;

 

 

 

 

 

2

 

DNBS-03 Return NBFCs-D and NBFCs-NDSI and Non-NDSI NBFCs having asset size more than 100 cr. The return captures compliance with prudential norms, e.g. Capital Adequacy, Asset Classification, Provisioning, NOF etc. for NBFC-Deposit taking & NBFC-NDSI 15th April

15th July

15th October

15th January

 

 

 

3

 

DNBS-04A Return Short Term Dynamic Liquidity (STDL) NBFCs-D and NBFCs-NDSI and Non-NDSI NBFCs having asset size more than 100 cr. To capture details of mismatch in projected future cash inflows as well as outflows based on the business projections 15th April

15th July

15th October

15th January

 

 

 

 

4

DNBS-06 RNBCs The return captures financial details like components of assets and liabilities as well as compliance with various prudential norms for RNBCs 15th April

15th July

15th October

15th January

 

 

 

 

 

5

DNBS-07 ARCs To capture financial parameters and different operational details e.g. assets (NPA) acquired, acquisition cost, their recovery status etc. for ARCs 15th April

15th July

15th October

15th January

 

 

6

DNBS08-CRILC Main Return NBFCs-D and NBFCs-NDSI and

NBFC-Factors

To capture the credit information on aggregate exposure of > 5 Crore to single borrower.

 

21th April

21th July

21th October

21th January

7 DNBS-11 NBFC-CICs The return captures financial details, viz. components of Assets as well as Liabilities, Profit & Loss account, Exposure to sensitive sectors etc., for CIC-ND-Sis. 15th April

15th July

15th October

15th January

8 DNBS-12 NBFC-CICs The return captures compliance with prudential norms, for e.g. Capital Adequacy, Asset Classification, Provisioning, NOF etc. for CIC-ND-Sis. 15th April

15th July

15th October

15th January

9 DNBS-13 All NBFCs To capture details of foreign investment for all NBFCs having overseas investment. 15th April

15th July

15th October

15th January

10 DNBS-14 NBFC P2Ps The return captures financial details like components of assets and liabilities as well as compliance with various prudential norms for NBFCs-P2P. 15th April

15th July

15th October

15th January

ANNUAL COMPLIANCES

S.No

 

Form Type of NBFC Description Due Date
 

 

 

 

 

1

 

 

 

DNBS-02 Return Non-NDSI NBFCs The return captures financials details such as components of assets and liabilities and compliance with various prudential norms for non-deposit taking non-NDSI NBFCs. On or before 30th May (either provisional or audited basis), if Provisional filled, then file audited within 30 days of finalisation of financials.
 

2

 

DNBS-010 All NBFCs and ARCs To ensure continous regulatory compliance for all NBFCs. Within 15 days from the date of finalising the balance sheet but not later than 31 Oct.

ADDITIONAL COMPLIANCES

S.No

 

Form Type of NBFC Description Due Date
 

 

 

1

 

 

DNBS-05 Return Rejected NBFC’s To capture details in respect of the NBFCs which accepted public deposits & whose CoR was rejected As when COR is rejected by RBI
 

 

 

2

 

 

DNBS09-CRILC SMA Details NBFCs-D and NBFCs-NDSI and

NBFC-Factors

All NBFCs-D, NBFCs-NDSI, & NBFCs-Factors with aggregate exposure > 5 Crore to the single borrower reported in SMA-2 for the day As and when the account is classified (de-classified) as SMA-2
 

 

 

3

 

 

CKYCR REs Every regulated entity (including NBFCs) shall do KYC while disbursing loans or creating account relationship. Within 10 days from the date of account relationship
 

4

CERSAI All Financials Institutions While disbursing secured loans As soon as possible for securing first charge over secured property.
 

 

 

5

FIU-IND All regulated Entities Report certain transaction to FIU-IND agency mentioned under rule 3 of PMLA rules 2005 Within 15th day of the succeeding month and within seven working days on being satisfied that the transaction is suspicious.

 

 

 

 

Prudential Regulation under RBI Master Direction’s Chapter IV Of RBI Master Direction

In addition to the RBI compliances for NBFCs listed above, non-banking institutions also need to follow the following rules:

  • Leverage Ratio: NBFCs must always maintain a leverage ratio of no more than 7, with the exception of NBFC-IFCs and NBFC-MFIs.
  • Investment accounting: The NBFC Board of Directors is responsible for developing and carrying out the company’s investment policy. Consider the standards for dividing investments into short-term and long-term ones.
  • Demand/Call Loans Policy: The Board of Directors of a relevant NBFC that desires to demand/call loans should develop a policy that would be carried out by the business.
  • Asset classification: The following classes of assets should be used by applicable NBFCs to classify their assets:
  1. Common Assets;
  2. inadequate assets;
  3. Uncertain Assets; and
  4. Assets Lost
  • Standard asset provisioning: Each relevant NBFC must set aside 0.25% of the outstanding balance for standard assets.
  • Multiple NBFCs: For the purpose of determining whether the asset size limit of 500 crore rupees has been met, all relevant NBFCs will be combined.
  • Disclosure in the Balance Sheet: Every NBFC will have a separate disclosure provision for doubtful/bad debts & depreciation in investments.
  • Loans secured by a company’s shares are not permitted: No applicable NBFC may lend to or obtain credit secured by a company’s shares.

The management of an NBFC must be well aware of these compliances and keep up with any changes to them. The most crucial compliances for NBFCs operating in India are some of these. If an NBFC doesn’t follow the RBI checklist, they’ll be hit with stiff fines and penalties.

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