How to Start a NBFC COMPLIANCE
Non-Banking Financial Companies (NBFCs) are involved in activities such as collecting deposits, providing loans and advances, and acquiring securities like stocks, equities, and government-issued marketable securities. These companies are registered under the Companies Act, 2013. While NBFCs are not classified as banks, they engage in lending operations similar to banks. Like banks, NBFCs are required to follow specific regulations and compliance requirements. Failure to comply with these regulations can result in severe consequences, including penalties and even the cancellation of the NBFC Registration Certificate.
NBFC compliance has become increasingly complex in recent years. There was a time when the regulatory environment for NBFCs was more lenient, and banks enjoyed some benefits from these non-banking entities. However, with the introduction of new regulations by the RBI, compliance has become stricter. NBFCs are now required to submit various returns to the RBI, including those related to deposit acceptance, Asset Liability Management (ALM), and compliance with prudential norms, as outlined in the Master Direction on NBFC Returns (Reserve Bank) Directions, 2016. These directions lay the foundation for safe and compliant operational practices for NBFCs. Given the complexity of NBFC compliance and returns, it is crucial to understand these regulations thoroughly to avoid significant penalties.
The Reserve Bank of India (RBI) has transitioned the existing process for filing supervisory returns from the COSMOS platform to the XBRL system. As a result, NBFCs are now required to meet the following requirements to file returns on the new XBRL portal:
Based on Activities:
Based on Liabilities:
The compliance requirements for NBFCs in India are divided into monthly, quarterly, and annual returns. Below are the details of the forms and their due dates for each category:
| Form | Type of NBFC | Description | Due Date |
|---|---|---|---|
| DNBS-04B (Return Structural Liquidity and Interest Rate Sensitivity) | NBFCs-NDSI and NBFCs-D | Captures mismatch in future cash inflows and outflows and interest rate risk. | Within 10 days from the end of each month. |
| NESL | All NBFCs | Report financial debt to NESL. | Within a week from the succeeding month. |
| CIC Reporting | All NBFCs | Report loans to all 4 Credit Information Companies (CICs). | On or before the 10th of the succeeding month. |
| Form | Type of NBFC | Description | Due Date |
|---|---|---|---|
| DNBS-01 Return | NBFCs-D & NBFCs-NDSI | Captures financial data such as assets, liabilities, P&L, and exposure to sensitive sectors. | 15th April, July, October, January |
| DNBS-03 Return | NBFCs-D & NBFCs-NDSI, Non-NDSI with assets over ₹100 cr | Reports compliance with prudential norms such as Capital Adequacy and Asset Classification. | 15th April, July, October, January |
| DNBS-04A Return (STDL) | NBFCs-D & NBFCs-NDSI, Non-NDSI with assets over ₹100 cr | Captures mismatch in cash inflows and outflows based on business projections. | 15th April, July, October, January |
| DNBS-06 | RNBCs | Captures financial details and compliance with prudential norms for RNBCs. | 15th April, July, October, January |
| DNBS-07 | ARCs | Captures financial details, NPA acquired, acquisition cost, and recovery status for ARCs. | 15th April, July, October, January |
| DNBS-08 (CRILC Main Return) | NBFCs-D, NBFCs-NDSI, NBFC Factors | Captures credit details on aggregate exposure > ₹5 crores to a single borrower. | 21st April, July, October, January |
| DNBS-11 | NBFC-CICs | Reports financial data, including assets, liabilities, P&L, and sector exposure for CIC-ND-Sis. | 15th April, July, October, January |
| DNBS-12 | NBFC-CICs | Reports compliance with prudential norms such as Capital Adequacy and Asset Classification for CIC-ND-Sis. | 15th April, July, October, January |
| DNBS-13 | All NBFCs | Captures information on foreign investment for NBFCs with foreign investment. | 15th April, July, October, January |
| DNBS-14 | NBFC-P2Ps | Reports financial information and compliance with prudential norms for P2P NBFCs. | 15th April, July, October, January |
| Form | Type of NBFC | Description | Due Date |
|---|---|---|---|
| DNBS-02 Return | Non-NDSI NBFCs | Captures financial details and compliance with prudential norms for non-deposit taking, non-NDSI NBFCs. | On or before 30th May (either audited or provisional). Audited returns due within 30 days of finalizing financials. |
| DNBS-010 | All NBFCs & ARCs | Ensures continuous regulatory compliance for all NBFCs. | Within 15 days from finalizing the balance sheet, but no later than 31st October. |
| Form | Type of NBFC | Description | Due Date |
|---|---|---|---|
| DNBS-05 Return | Rejected NBFCs | Reports details for NBFCs whose Certificate of Registration (CoR) was rejected by RBI. | As and when the CoR is rejected by RBI. |
| DNBS-09-CRILC SMA Details | NBFCs-NDSI, NBFCs-D, NBFC-Factors | Reports accounts classified as SMA-2 with exposure > ₹5 crores. | As and when the account is classified (or declassified) as SMA-2. |
| CKYCR | All Regulated Entities | KYC compliance for loan disbursements or account relationships. | Within 10 days from the date of establishing the account relationship. |
| CERSAI | All Financial Institutions | KYC for securing the first change of secured property in loans. | As soon as possible. |
| FIU-IND | All Regulated Entities | Reporting suspicious transactions to FIU-IND. | By the 15th of the succeeding month or within 7 working days if suspicious. |
In addition to the above compliance returns, NBFCs must follow the prudential regulations under the RBI Master Direction, which include:
Failure to adhere to NBFC compliance requirements on time can result in severe penalties imposed by the RBI. The penalties for non-compliance differ depending on the type of NBFC. One of the most significant consequences could be the revocation of the NBFC license, which may ultimately lead to the closure of the company.
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