How to Start an NBFC in India: Registration, Capital and Project Cost
A non-banking financial company (NBFC) is a company engaged principally in specified financial activities such as loans, advances or investments. Establishing a regulated NBFC involves more than renting an office: the proposed business must meet the applicable Reserve Bank of India (RBI) registration, capital, governance and prudential requirements.
What is an NBFC under Indian law?
Section 45-I(f) of the Reserve Bank of India Act, 1934 defines a non-banking financial company by reference to the specified financial-institution and non-banking-institution categories. RBI uses a principal-business assessment, commonly referred to as the 50-50 test: financial assets constituting more than 50% of total assets and income from financial assets constituting more than 50% of gross income. This assessment helps distinguish regulated financial activity from incidental finance undertaken by other businesses.
Section 45-IA of the RBI Act, 1934 requires an NBFC covered by the provision to obtain an RBI certificate of registration (CoR) and meet the applicable net owned fund (NOF) requirement before commencing or carrying on the relevant business. Net owned fund is a regulatory capital measure determined under Section 45-IA and related RBI directions; it is not the same as a project's total spending, authorised share capital or bank balance.
Registration treatment differs for deposit-taking and non-deposit-taking NBFCs, and certain financial businesses are regulated under other frameworks or exemptions. A normal NBFC registration does not by itself authorise public-deposit acceptance. Check the RBI website and the RBI list of registered NBFCs for current information.
Minimum capital and RBI registration requirements
RBI's revised regulatory framework raised the minimum NOF for several categories of NBFCs, including newly registered NBFC-Investment and Credit Companies (NBFC-ICCs), NBFC-Micro Finance Institutions (NBFC-MFIs) and NBFC-Factors, to Rs. 10 crore, subject to category-specific requirements and transitional arrangements for existing entities. Other NBFC categories can have different capital criteria. Verify the precise classification, latest directions, effective dates and exceptions before incorporating or capitalising the applicant company.
RBI evaluates the application, promoters and directors, source of capital, proposed activity, business plan, governance, financial soundness and supporting documents. Incorporation with the Ministry of Corporate Affairs does not constitute RBI approval. Consult RBI's official directions, circulars and registration guidance and the applicable online application procedure.
Original location-wise NBFC project cost estimates
The original page described an NBFC setup covering office rent, vehicles, staff, computers, software, equipment and furniture. Its illustrative estimates are preserved here for reference. They are historical planning figures, not verified current quotations and not a substitute for RBI-mandated regulatory capital.
| Area | Location type | Original indicative project cost |
|---|---|---|
| Urban | Commercial complexes and business centres | Rs. 3,00,00,000 (3 crore) |
| Urban | Other locations | Rs. 2,50,00,000 (2.5 crore) |
| Semi-urban | Commercial complexes and business centres | Rs. 2,50,00,000 (2.5 crore) |
| Semi-urban | Other locations | Rs. 2,40,00,000 (2.4 crore) |
| Rural | Suitable office premises | Rs. 2,20,00,000 (2.2 crore) |
An NBFC does not have a universal legal requirement to operate from a particular city or size of office. Premises should suit customer service, record retention, security, staffing and regulatory inspections. Actual costs depend far more on lending scale, funding, technology, risk systems and the RBI category than on location alone.
What a realistic NBFC business plan should budget
- Regulatory capital: qualifying NOF, separately verified for the intended NBFC classification.
- Incorporation and professional costs: company formation, legal review, regulatory application, compliance policies and professional advice.
- Office and personnel: rent, deposits, furniture, computers, experienced management, credit and compliance teams.
- Technology and controls: loan-origination and management software, cybersecurity, accounting, KYC systems, data storage, audit trails and disaster recovery.
- Operations and risk: underwriting, credit bureau services, collections, grievance redressal, internal audit, external audit and reporting.
- Funding and liquidity: resources for the loan book, funding costs, liquidity buffers, expected credit losses and operating expenses.
Key Indian laws and RBI rules for NBFCs
RBI Act and prudential regulation
Sections 45-IA and 45-IC of the RBI Act, 1934 concern registration/NOF and creation of a reserve fund, respectively. Under Section 45-IC, covered NBFCs must transfer at least 20% of net profit each year to a reserve fund before declaring dividends, subject to the statute. Applicable RBI Scale Based Regulation (SBR) directions classify NBFCs into regulatory layers and prescribe governance, capital, asset classification, provisioning and reporting obligations according to the category and risk profile.
Customer due diligence and anti-money-laundering
NBFCs must assess obligations under the Prevention of Money-laundering Act, 2002, the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 and RBI's Master Direction - Know Your Customer (KYC), as amended. Requirements include customer identification, beneficial ownership checks, transaction monitoring, record retention and applicable reporting. Refer to RBI and FIU-IND.
Fair lending, digital lending and borrower protection
Applicable RBI fair-practices, outsourcing, recovery-agent, grievance-redressal and digital-lending directions address transparent loan terms, charges, borrower communication, loan disbursal and collection practices. Where digital lending is used, verify the current RBI digital-lending framework, including rules governing lending service providers, customer consent and data handling.
Company law, taxation and personal data
The Companies Act, 2013 governs incorporation, directors, financial statements and corporate filings; consult MCA. The Income-tax Act, 1961 and applicable successor provisions, commencement and transitional rules govern direct taxes; see the Income Tax Department. GST treatment of financial services depends on the transaction: interest on loans is generally exempt under the applicable exemption notification, while certain processing or service fees may be taxable. Consult GST and CBIC. For personal data, verify the provisions and commencement notifications applicable to the Digital Personal Data Protection Act, 2023 and its rules through MeitY.
Steps to establish an NBFC in India
- Choose the intended financial activity and confirm whether RBI NBFC registration or another regulatory regime applies.
- Identify the NBFC category and obtain the latest capital, eligibility and governance requirements from RBI.
- Prepare promoter background documentation, ownership structure, funding evidence and a detailed business plan.
- Incorporate an appropriate company and arrange qualifying capital, governance personnel and operational systems.
- Submit the RBI application through the current prescribed channel with required supporting documents.
- Do not commence regulated NBFC business before the required certificate or authorisation is granted.
- After approval, implement applicable KYC, fair-practices, reporting, audit, prudential, customer-protection and cybersecurity controls.
Frequently asked questions
Can an NBFC start with Rs. 2.2 crore?
The original page lists Rs. 2.2 crore as a rural project-cost estimate, but it is not a general RBI minimum. For many new NBFC categories the NOF threshold is Rs. 10 crore; check the exact category and prevailing RBI rules.
Is RBI approval mandatory?
For a company undertaking NBFC business that falls within Section 45-IA, the requisite RBI registration is generally mandatory unless a specific statutory or regulatory exemption applies.
Can a newly registered NBFC accept public deposits?
Not merely by obtaining a standard NBFC registration. Deposit acceptance is separately restricted and regulated; specific RBI authorisation and compliance are necessary where permitted.
Official legal texts: India Code. Requirements depend on category and amendments; verify current RBI directions and consult qualified advisers before applying. Article updated: 9 October 2026.