NBFC Compliance Checklist
NBFCs are the key pillars of the financial sector, elevating financial inclusivity for those experiencing capital or credit issues. The advent of NBFCs has harmonized the financial sector and broadened credit accessibility, spanning almost all kinds of entities regardless of footprint or sector.
NBFCs in India experience stringent operational norms to keep things transparent and legitimate. They have a long list of compliances to follow underpinned by governing authority i.e. Reserve Bank of India. This article delves into the NBFC compliance checklist to ascertain what rules exactly apply to them.
Understanding the Significance of NBFC Compliance
Unlike other institutions or entities, NBFCs experienced stiff regulations to stay compliant. The operational norms for them have increasingly tightened to keep them on track. The recently launched RBI guidelines have made things even more challenging for them.
As per the Master Direction, NBFC Returns (Reserve Bank) Directions, 2016, these entities are required to file myriad returns to the Reserve Bank concerning their:
- Deposit acceptance
- ALM
- Prudential Norms Compliance
Non-compliance can lead to several repercussions, including stiff penalties. Therefore, knowing these directives is as important as paying attention to business operations.
Prerequisites for NBFC Compliances in India
Before we unfold the NBFC compliance checklist, make sure they abide by the following conditions. Doing so will ensure seamless adherence to the operational rules, ensuring safe and compliant operation.
Previously, NBFCs were required to use the COSMOS platform for filing online returns. RBI has traded off this portal over the XBRL system, which now helps with returns filing. To leverage the XBRL system, the NBFCs are required to:
- Secure the RBI’s user ID and password;
- Install the XBRL RBI file on the system;
- Update the profile on the XBRL portal as and when required
Taking A Deep Dive into the NBFC Compliance Checklist
The NBFC compliance checklist spans mandatory operational norms and return-filling requirements that every NBFC must follow:
Monthly Compliances for NBFCs
| Form | Types of NBFC | Description | Due Date |
| DNBS-04B | NBFCs-NDSI and NBFCs-D | This form reflects the potential mismatching in predicted future cash inflows and outflows for NBFCs-NDSI. This data should be on the cash flow’s maturity pattern at the reporting period’s completion. It also entails interest rate risk facts or information | It requires monthly filing; it should be filed within 10 days after the month’s end |
| NESL | All Non-Banking Finance Companies | NESL is used to pay financial debt to NESL. | Should be filed within a week from the inception of next month |
| CIC Reporting | All Non-Banking Finance Companies | Use to reveal loans to all four CICs. | Should be filed within 10 days from the month’s inception |
Annual Compliances for NBFCs
| Form | Types of NBFC | Description | Due Date |
| DNBS-02 Return | Non-NDSI NBFCs | It is used to reflect information concerning assets and liabilities, compliance concerning prudential norms | Must be filed on or before May 30th regardless of status i.e. audited or provisional. Those leveraging a provisional basis must complete an audit within 30 days of financial finalization. |
| DNBS-010 | All NBFCs & ARCs | Use to affirm adherence to continual regulatory compliance (NBFCs). | It must be filed within 15 days of the finalization date of the balance sheet. The filing date should not surpass the deadline i.e. October 31. |
NBFC Compliance Checklist: Take a closer look at additional norms
| Form | Types of NBFC | Description | Due Date |
| DNBS09-CRILC SMA Details | NBFCs-NDSI & NBFCs-D & NBFC-Factors | Use for reporting aggregate exposure of more than $5 million to a single borrower reported in SMA-2. | On or before Wednesday of the upcoming week |
| CKYCR | REs | Use to reflect the loan disbursement activity for a new debtor | Within ten days of onboarding a new debtor. |
| CERSAI | All Financial Institutions | Use to reflect secured loan payments made by NBFCs | Within 30 days of the transaction. |
| FIU-IND | All regulated companies | Use to reveal transactions filed with FIU-IND agency, as specified in Rule 3 of the PMLA Rules 2005. | Within seven days of the transaction or before 15 of the subsequent month |
Understanding Prudential Norms of RBI Master Direction
Apart from the above NBFC compliance checklist, adherence to the following norms is also paramount:
- The NBFC’s BOD must devise and deploy the investment policy, such as criterion concerning asset classification.
- All NBFCs must have an asset threshold of Rs. 500 crores collectively.
- Issuance of shares against the company’s shares is not permissible. This signifies that no NBFC can accept credit against its shares.
- The BODs seeking to offer Demand or Call Loans must devise and deploy policy accordingly.
- All NBFCs must ensure apt asset classification based on categories such as Loss Assets, Standard and sub-standard assets, doubtful assets, etc.
- Every NBFC must stay transparent with authority on account of doubtful or bad debts and depreciation in investments. Companies must devise an independent provision for the same.
- NBFCs with standard assets at 0.25 percent of the outstanding must devise a provision for the same.
Bottomline
The world of NBFCs is full of legal hurdles and endless compliances. Be it a matter of asset categorization or filing returns to disclose key transactions, NBFCs, depending on their nature and footprint, can face overwhelming operational norms. To keep things under control, every NBFC strives for a transparent approach that involves leveraging a separate department for compliance handling. It is worth noting that non-adherence to the above NBFC compliance checklist can result in severe penalties, including license revocation and permanent halt of activities.
Therefore, it becomes incredibly important to approach professionally. At Advisor, we believe in simplifying the business journey for our clients regardless of compliance threshold or operational hurdles. We foster a successful association with dozens of NBFCs, helping them comply with what is mandatory with ease.
Read Our Article: How To Get NBFC License In India?
