CRUCIAL INFORMATION FOR ALL NON-BANKING FINANCIAL COMPANY (NBFC)

As per the recent revised regulatory framework by the Reserve Bank of India (RBI), existing NBFCs are required to increase their Net Owned Funds (NOF) from Rs. 2 crore to a minimum of Rs. 5 crore by 31st March 2025, and further to Rs. 7 crore by 31st March 2027. It’s imperative to note that any failure to meet these requirements may result in the cancellation of the NBFC license by the RBI.

The primary objective behind this regulatory change is to eliminate non-operational NBFCs from the ecosystem and from the RBI’s regulatory framework. It’s a strategic move to ensure that NBFCs actively engaged in business maintain a sufficient level of financial strength and stability.

One significant update worth highlighting is that the RBI has ceased giving approvals for takeovers of non-operational NBFCs. This step aims to prevent individuals from engaging in trading of licenses issued by the RBI. Previously, takeovers were common, often pursued solely for the sake of obtaining an NBFC license. However, this avenue is no longer feasible.

Despite this development, many professionals remain unaware of these changes, leading to a misconception that non-operational NBFCs still hold substantial value due to their licenses. However, with the RBI’s stringent regulations and the discontinuation of approval for takeovers, the viability of such entities is questionable.

At this juncture, it’s crucial for NBFC promoters and professionals to reassess their strategies and take necessary actions to comply with the revised regulatory requirements. For NBFCs that have been non-operational for an extended period, the options are limited – either surrender the license or seek an interested purchaser who is willing to actively pursue NBFC business.

As trusted advisors in the financial sector, we understand the complexities and challenges associated with these regulatory changes. Our team is here to provide professional advice and assist in devising action plans tailored to your specific needs and circumstances.

In conclusion, staying informed and proactive is key to navigating the evolving regulatory landscape of the NBFC sector. Let’s work together to ensure compliance and sustainability in the ever-changing financial ecosystem.