NBFC Annual Compliance |

NBFC Annual Compliance

Non-Banking Financial Companies (NBFCs) play a crucial role in the Indian financial system, but many business owners struggle with the extensive compliance requirements imposed on these entities. At Estabizz Fintech, we specialize in helping NBFCs fulfill their compliance requirements, providing a comprehensive range of services to ensure smooth operations and adherence to all regulatory guidelines.

The Importance of NBFC Compliance: Penalties and Consequences

NBFCs, which engage in lending activities similar to banks, must comply with specific regulations and file returns periodically to maintain their operations legally. Failure to adhere to these compliance requirements can result in severe consequences, including monetary penalties and even the cancellation of the Certificate of Registration. Therefore, it is crucial for NBFCs to prioritize compliance to avoid any legal issues.

Our Package Inclusions: Covering All Aspects of NBFC Compliance

We offer a wide range of services as part of our NBFC compliance package, designed to address all your compliance needs:
Annual Compliance Tracker: Stay on top of all your compliance requirements with our comprehensive tracker.
Drafting of Policies and Loan Documents: Ensure your company has well-drafted policies and loan documents that meet all regulatory standards.
Statutory Return Filing: We assist in filing all necessary statutory returns on time and accurately.
Mandatory Registration: We guide you through the process of mandatory registration to ensure compliance with regulatory authorities.
Training on Reporting to Various Agencies: Get the necessary training to report to agencies such as CIC, CKYC, CERSAI, NESL, and FIUIND.
Financial Review and RBI Query Management: We review your financials and help draft effective replies for any queries received from RBI, ensuring a smooth interaction with regulators.
Liaising with RBI: We act as a liaison between your company and the Reserve Bank of India, handling all necessary communications.
Advisory on PBC Criteria and Net Owned Fund: Get expert advice on maintaining PBC criteria and achieving net owned fund targets.
Advisory on Income Recognition, Asset Classification, and Provisioning: Ensure your company follows proper guidelines for income recognition, asset classification, and provisioning.
Complete Overview of NBFC Compliances and Returns: Gain a comprehensive understanding of all NBFC compliance requirements, enabling you to navigate them effectively.

Types of NBFCs and Associated Compliance Requirements

NBFCs can be categorized based on their activities and liabilities. We provide an overview of each category below:
NBFCs based on Activity
Investment and Credit Company: These companies focus on asset finance and provide financial support primarily through lending.
Mortgage Guarantee Company: NBFCs in this category primarily engage in mortgage guarantee business.
Infrastructure Finance Company: These companies allocate at least 75% of their total assets to infrastructure loans.
Non-Operative Financial Holding Company (NOFHC): NOFHCs are authorized to set up new banks and control other financial companies regulated by the RBI.
Micro Finance Company: These NBFCs provide loans to underserved small businesses, similar to traditional banks.
NBFC Factors: These NBFCs specialize in factoring and have financial assets constituting at least 50% of their total assets.
Infrastructure Debt Fund NBFC: This category of NBFCs simplifies long-term debt and is funded exclusively by infrastructure finance companies.
NBFC Account Aggregator: These licensed NBFCs provide services related to the retrieval and collection of financial information for their customers.
NBFC P2P: NBFC P2P lending platforms connect lenders and borrowers digitally, simplifying the loan application and processing procedures.
Housing Finance Companies (HFCs): HFCs specialize in financing the acquisition or construction of houses.

NBFCs based on Liabilities

Deposit Taking NBFCs: These NBFCs accept deposits from customers.
Non-Deposit Taking NBFCs: This category further comprises systematically important NBFCs and other non-deposit taking NBFCs.

Prioritize Compliance with Estabizz Fintech

With our comprehensive range of services and expert guidance, Estabizz Fintech is your go-to solution for ensuring NBFC compliance. Don't risk the severe consequences of non-compliance—partner with us to fulfill all your compliance requirements and achieve smooth operations. Get in touch with us today to learn more.

Monthly Compliances

Form DNBS-04B: Return on Structural Liquidity & Interest Rate Sensitivity
Type of NBFC: NBFCs-D and NBFCs-NDSI
Description: This form captures the details of mismatch in projected future cash inflows and outflows based on the maturity pattern of assets and liabilities at the end of the reporting period for NBFCs-NDSI. It also captures details of interest rate risk.
Due Date: Within 10 days from the end of every month
CIC Reporting
Type of NBFC: All NBFCs
Description: Every NBFC is required to report its loans to all four Credit Information Companies (CICs).
Due Date: On or before the 10th day of the succeeding month NESL Reporting
Type of NBFC: All NBFCs
Description: All NBFCs are required to report their financial debt to the National E-Governance Services Ltd. (NESL).
Due Date: Within a week from the date of the succeeding month

Quarterly Compliances

Form DNBS-01: Return
Type of NBFC: NBFCs-D and NBFCs-NDSI
Description: This return captures financial details such as components of assets and liabilities, profit and loss account, and exposure to sensitive sectors for NBFC-D and NBFC-NDSI.
Due Date: 15th April, 15th July, 15th October, 15th January
Form DNBS-03: Return
Type of NBFC: NBFCs-D and NBFCs-NDSI and Non-NDSI NBFCs with asset size more than 100 crore rupees
Description: This return captures compliance with prudential norms such as capital adequacy, asset classification, provisioning, and net owned funds for NBFC-Deposit taking and NBFC-NDSI.
Due Date: 15th April, 15th July, 15th October, 15th January
Form DNBS-04A: Return on Short Term Dynamic Liquidity (STDL)
Type of NBFC: NBFCs-D and NBFCs-NDSI and Non-NDSI NBFCs with asset size more than 100 crore rupees
Description: This return captures details of mismatch in projected future cash inflows and outflows based on business projections.
Due Date: 15th April, 15th July, 15th October, 15th January
Form DNBS-06
Type of NBFC: RNBCs
Description: This return captures financial details such as components of assets and liabilities, as well as compliance with various prudential norms for RNBCs.
Due Date: 15th April, 15th July, 15th October, 15th January
Form DNBS-07
Type of NBFC: ARCs
Description: This return captures financial parameters and operational details such as assets acquired, acquisition cost, and recovery status for ARCs.
Due Date: 15th April, 15th July, 15th October, 15th January
Form DNBS08-CRILC Main Return
Type of NBFC: NBFCs-D, NBFCs-NDSI, NBFC-Factors
Description: This return captures credit information on aggregate exposure of more than 5 crore rupees to a single borrower.
Due Date: 21st April, 21st July, 21st October, 21st January
Form DNBS-11
Type of NBFC: NBFC-CICs
Description: This return captures financial details such as components of assets and liabilities, profit and loss account, and exposure to sensitive sectors for CIC-ND-Sis.
Due Date: 15th April, 15th July, 15th October, 15th January
Form DNBS-12
Type of NBFC: NBFC-CICs
Description: This return captures compliance with prudential norms such as capital adequacy, asset classification, provisioning, and net owned funds for CIC-ND-Sis.
Due Date: 15th April, 15th July, 15th October, 15th January
Form DNBS-13
Type of NBFC: All NBFCs
Description: This return captures details of foreign investment for all NBFCs with overseas investment.
Due Date: 15th April, 15th July, 15th October, 15th January
Form DNBS-14
Type of NBFC: NBFC P2Ps
Description: This return captures financial details such as components of assets and liabilities, as well as compliance with various prudential norms for NBFCs-P2P.
Due Date: 15th April, 15th July, 15th October, 15th January

Annual Compliances

Form DNBS-02: Return
Type of NBFC: Non-NDSI NBFCs
Description: This return captures financial details such as components of assets and liabilities, as well as compliance with various prudential norms for non-deposit taking non-NDSI NBFCs.
Due Date: On or before 30th May (either provisional or audited basis). If provisional, then file audited within 30 days of finalization of financials.
Form DNBS-10
Type of NBFC: All NBFCs and ARCs
Description: This form ensures continuous regulatory compliance for all NBFCs.
Due Date: Within 15 days from the date of finalizing the balance sheet, but not later than 31st October

Additional Compliances

Form DNBS-05: Return
Type of NBFC: Rejected NBFCs
Description: This return captures details of NBFCs that accepted public deposits but had their Registration Certificate (CoR) rejected.
Due Date: As and when the CoR is rejected by RBI
Form DNBS09-CRILC SMA Details
Type of NBFC: NBFCs-D, NBFCs-NDSI, NBFC-Factors
Description: This form captures SMA-2 details for NBFCs-D, NBFCs-NDSI, and NBFCs-Factors with aggregate exposure of more than 5 crore rupees to a single borrower.
Due Date: As and when the account is classified (de-classified) as SMA-2
CKYCR
Type of NBFC: REs
Description: Every regulated entity, including NBFCs, must perform Know Your Customer (KYC) while disbursing loans or creating account relationships.
Due Date: Within 10 days from the date of account relationship
CERSAI
Type of NBFC: All Financial Institutions
Description: All financial institutions must register secured loans with the Central Registry of Securitization Asset Reconstruction and Security Interest (CERSAI) to secure the first charge over secured property.
Due Date: As soon as possible after securing the loan
FIU-IND
Type of NBFC: All regulated Entities
Description: Regulated entities, including NBFCs, must report certain transactions to the Financial Intelligence Unit-India (FIU-IND) agency mentioned under the Prevention of Money Laundering Act (PMLA) rules 2005.
Due Date: Within the 15th day of the succeeding month and within seven working days when a transaction is deemed suspicious.

Prudential Regulation under RBI Master Direction (Chapter IV)

In addition to the RBI compliances listed above, non-banking financial companies (NBFCs) must also comply with the following prudential regulations:
Leverage Ratio: NBFCs (except NBFC-IFCs and NBFC-MFIs) must maintain a leverage ratio of not exceeding 7.
Accounting of Investments: NBFCs' Board of Directors must frame an investment policy and categorize investments into current and long-term investments.
Policy for Demand/Call Loans: NBFCs that wish to demand or call loans must have a policy in place.
Classification of Assets: NBFCs should classify their assets into standard, sub-standard, doubtful, and loss categories.
Provisioning of Standard Assets: NBFCs must make provisions for standard assets at 0.25% of the outstanding amount.
Multiple NBFCs: All applicable NBFCs will be aggregated jointly to determine the asset size limit of 500 crore rupees.
Disclosure in the Balance Sheet: NBFCs must have separate disclosure provisions for doubtful/bad debts and depreciation in investments.
Prohibition of Loans against Company Shares: NBFCs are prohibited from lending against their own shares.

It is crucial for NBFC management to be aware of and stay updated on these compliances. Non-compliance with the RBI checklist may result in heavy fines and penalties. Estabizz Fintech offers NBFC advisory, compliance, and consultancy services with expert professionals experienced in NBFC services.
Estabizz Fintech may help with NBFC annual compliance and reporting.
Automated Reporting: Fintech companies specializing in NBFC compliance can offer automated reporting solutions. They can help streamline the process of gathering and compiling relevant data, generating reports, and submitting them to the regulatory authorities within the stipulated timelines.
Compliance Software: Fintech companies may offer compliance software specifically designed for NBFCs. This software can help NBFCs manage and monitor their compliance requirements, track deadlines, and generate necessary reports. It may also include features like data validation, risk assessment, and audit trail maintenance.
Regulatory Updates: Fintech companies may provide regular updates on regulatory changes and requirements specific to NBFC compliance. This ensures that NBFCs stay informed about the latest guidelines and can proactively adjust their compliance strategies accordingly.
Expert Guidance: Some fintech companies may offer expert guidance and consultancy services to NBFCs. This can include assistance in understanding regulatory requirements, developing compliance frameworks, and implementing best practices in line with industry standards.
Integration with External Systems: Fintech solutions can be designed to integrate with an NBFC's existing systems, such as accounting and risk management platforms. This ensures seamless data flow and reduces manual effort in maintaining compliance and reporting.

FAQ

What is an NBFC and why is compliance important for them?

A Non-Banking Financial Company (NBFC) is a financial institution that provides banking services without holding a banking license. Compliance is important for NBFCs to ensure adherence to regulatory guidelines, maintain transparency, and protect the interests of stakeholders.

Which types of NBFCs are required to submit monthly compliances?

NBFCs-D (Deposit-taking NBFCs) and NBFCs-NDSI (Non-Deposit-taking NBFCs with asset size of ₹500 crore or more) are required to submit monthly compliances.

What are the quarterly compliances that NBFCs need to meet?

NBFCs-D, NBFCs-NDSI, and Non-NDSI NBFCs with asset size of ₹100 crore or more are required to fulfill quarterly compliances, including Form DNBS-01, DNBS-03, DNBS-04A, DNBS-06, DNBS-07, DNBS08-CRILC Main Return, DNBS-11, DNBS-12, DNBS-13, and DNBS-14.

When is the annual compliance return required to be submitted by non-NDSI NBFCs?

Non-NDSI NBFCs are required to submit the annual compliance return (Form DNBS-02) on or before 30th May, either on a provisional or audited basis. If provisional, then the audited version must be filed within 30 days of finalization of financials.

What is the purpose of Form DNBS-04B and who needs to submit it?

Form DNBS-04B captures details of structural liquidity and interest rate sensitivity for NBFCs-NDSI. It must be submitted by NBFCs-NDSI within 10 days from the end of every month.

What is the due date for submitting Form DNBS-02, the annual return for non-NDSI NBFCs?

Form DNBS-02, the annual return for non-NDSI NBFCs, should be submitted on or before 30th May, either on a provisional or audited basis.

What are the additional compliances that NBFCs may need to fulfill?

Additional compliances include Form DNBS-05 for rejected NBFCs, Form DNBS09-CRILC SMA Details, CKYCR for Know Your Customer, CERSAI for registering secured loans, and FIU-IND reporting for suspicious transactions, among others.

Do all NBFCs need to report loans to Credit Information Companies (CICs)?

Yes, all NBFCs are required to report their loans to all four Credit Information Companies (CICs).

Is there a specific due date for reporting loans to CICs?

NBFCs must report their loans to CICs on or before the 10th day of the succeeding month.

What is NESL reporting and is it applicable to all NBFCs?

NESL reporting refers to reporting financial debt to the National E-Governance Services Ltd. (NESL). It is applicable to all NBFCs.

Is there a specific due date for NESL reporting?

SL reporting should be done within a week from the end of the succeeding month.

What is the purpose of Form DNBS-01 and who is required to submit it?

Form DNBS-01 captures financial details of assets, liabilities, profit and loss account, and exposure to sensitive sectors. It is required to be submitted by NBFCs-D and NBFCs-NDSI.

Are all NBFCs required to comply with prudential regulations under RBI Master Direction?

Yes, all applicable NBFCs must comply with the prudential regulations specified under RBI Master Direction.

Is there a limit on the leverage ratio for NBFCs?

NBFCs (except NBFC-IFCs and NBFC-MFIs) are required to maintain a leverage ratio not exceeding 7.

Do NBFCs need to have an investment policy in place?

Yes, NBFCs are required to have an investment policy in place and categorize their investments as current and long-term.

Can NBFCs demand or call loans without a specific policy?

NBFCs that wish to demand or call loans must have a specific policy in place.

How should NBFCs classify their assets?

NBFCs should classify their assets into standard, sub-standard, doubtful, and loss categories.

Do NBFCs need to make provisions for standard assets?

Yes, NBFCs must make provisions for standard assets at 0.25% of the outstanding amount.

Are there any restrictions on NBFCs lending against their own shares?

Yes, NBFCs must make provisions for standard assets at 0.25% of the outstanding amount.

What are the consequences of non-compliance with NBFC regulations?

Non-compliance with NBFC regulations can result in heavy fines, penalties, license revocation, reputational damage, and legal consequences.

Our Blog

The Importance of NBFC Compliance: Penalties and Consequences
Our Package Inclusions: Covering All Aspects of NBFC Compliance
Types of NBFCs and Associated Compliance Requirements
Prioritize Compliance with Estabizz Fintech
Monthly Compliances
Quarterly Compliances
Annual Compliances
Additional Compliances
Prudential Regulation under RBI Master Direction (Chapter IV)
FAQ
Blog