Mohali · Ludhiana · Serving clients across India
NBFC Advisory
Advisory on registration of Non-Banking Financial Companies with the Reserve Bank of India, ongoing compliance under the Scale Based Regulation framework, and acquisitions and changes in control of NBFCs.
Context
Consolidation and strategic entry in the NBFC sector
For corporates, financial investors and promoter groups looking to enter lending, an investment in an existing NBFC is often a quicker route than building one from scratch. It brings a regulated entity, a loan book, systems and people on day one.
At the same time, higher capital requirements and tighter regulation under the RBI’s Scale Based Regulation framework are prompting smaller NBFCs to consolidate, bring in strategic investors or combine with larger platforms. Every such transaction is shaped by RBI prior-approval requirements, and by diligence and valuation methods that differ from those used for other businesses.
Scale Based Regulation
Regulatory layers
| Layer | Composition | Principal requirements |
|---|---|---|
| Base Layer | Non-deposit-taking NBFCs with assets below ₹1,000 crore; NBFC-P2P, NBFC-AA, NOFHC and NBFCs not availing public funds without customer interface | NOF, prudential norms, governance and conduct requirements |
| Middle Layer | Deposit-taking NBFCs; non-deposit-taking NBFCs with assets of ₹1,000 crore or more; SPDs, IDF-NBFCs, CICs, HFCs and IFCs | Capital adequacy, concentration norms, independent directors, risk management and audit committees, compliance function |
| Upper Layer | NBFCs identified by the RBI on parameters of size, interconnectedness and complexity | Common Equity Tier 1 requirements, large exposure framework, mandatory listing within three years of identification |
| Top Layer | Populated only if the RBI considers there is a substantial increase in systemic risk | Specific supervisory measures |
Change in control
Transactions requiring prior RBI approval
An acquisition of an NBFC, or a change in its shareholding or management beyond specified limits, requires the RBI's prior written permission.
| Event | Requirement |
|---|---|
| Takeover or acquisition of control | Prior approval, whether or not it results in a change of management |
| Shareholding of 26% or more | Prior approval for any change, including progressive increases over time, that results in acquisition or transfer of 26% or more of paid-up equity capital |
| Change in directors | Prior approval for a change in management resulting in a change of more than 30% of directors, excluding independent directors and directors re-elected on retirement by rotation |
| Public notice | After approval, notice of at least 30 days before effecting the change, in one national and one vernacular newspaper |
Scope of services
Our NBFC transaction services
NBFC acquisitions
Identification of target NBFCs, evaluation of their licence category and loan book, negotiation of terms, and completion through to the RBI approval.
Strategic investment
Structuring of equity investment by strategic or financial investors, including shareholding thresholds, board rights and the approvals they trigger.
Divestment of NBFC stakes
Exit for promoters and investors through a managed process with suitable strategic and financial counterparties.
Mergers and consolidation
Schemes of amalgamation between NBFCs, or of an NBFC into a group entity, together with the RBI and NCLT processes.
Valuation of NBFCs
Valuation on price-to-book, residual income and dividend discount approaches, adjusted for asset quality, provisioning and the cost of capital.
Due diligence
Review of the loan book, provisioning, asset–liability profile, RBI inspection findings and correspondence, governance and technology arrangements.
Capital raising
Equity raising from strategic and financial investors to support growth and the capital levels required for the NBFC's regulatory layer.
Lending partnerships
Structuring of co-lending and partnership arrangements with banks and other lenders under the RBI's 2025 directions.
Group structuring
Holding structures for groups with several financial-services entities, including core investment company considerations.
Process
Registration with the RBI
Registration typically takes eight to fourteen months from incorporation, depending on the completeness of the application and the RBI's queries.
01
Incorporation
Company incorporated with financial-services objects in the memorandum.
02
Net Owned Fund
₹10 crore infused as equity, held in a bank account and certified.
03
Business plan and policies
Five-year business plan, Fair Practices Code, KYC/AML, IT and grievance redressal policies.
04
Fit-and-proper documents
Credit reports, banker's reports, net worth and declarations of directors and promoters.
05
Application on COSMOS
Online application to the RBI with supporting documents.
06
RBI examination
Responses to queries; grant of Certificate of Registration.
NBFC Advisory
Acquisitions, investments, mergers and divestments of NBFCs.