How to Register a Vehicle (asset) Finance Company in India – A Non Banking Financial Company (NBFC)

1.0 What is a Vehicle Finance Company?

Vehicle Finance Company in India is the company which finances the physical assets like automobiles, cars etc. In India, no company can do the business of vehicle finance without the prior registration with the Reserve Bank of India (RBI).
In legal terms, vehicle finance company is known as Asset Finance Company.

As per Reserve Bank of India (RBI), An AFC is a company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive/economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipment, moving on own power and general purpose industrial machines.

Principal business for this purpose is defined as aggregate of financing real/physical assets supporting economic activity and income arising there from is not less than 60% of its total assets and total income respectively

2.0 Is Nidhi Companies are eligible to conduct the business of Vehicle Finance Company?

No, a Nidhi Company is not eligible to do the business of Vehicle Finance Company in terms of Rule 15 of Nidhi Rules, 2014.

3.0 What happens if I do not take RBI registration and conducts the asset finance business?

As per Reserve Bank of India (RBI), companies that are required to be registered with the Reserve Bank as NBFCs, are found to be conducting non-banking financial activity, such as, lending, investment or deposit acceptance as their principal business, without seeking registration, the Reserve Bank can impose penalty or fine on them or can even prosecute them in a court of law.

PROCESS AND REQUIREMENT FOR VEHICLE (ASSET) FINANCE COMPANY REGISTRATION IN INDIA

4.0 Procedure to Register the Asset Finance Company (AFC) in India

The procedure of registering the Asset Finance Company (AFC) in India is a little complex and since permission of Reserve Bank of India is involved, the whole process could take months to complete.

However, the license of Reserve Bank of India (RBI) is so valuable that waiting for months is a real worth. Let us understand the procedure in brief:

#Step 1: Register a Company:
The first step to start the Asset Finance Company registration is to register the Company in India. The company type could be Public or Private, as per the choice of the founders. The Company may be registered with any amount of capital initially.

#Step 2: Raise Authorised and Paid up Capital to two Crores:
The next step is to raise the share capital both authorised and Paid up to Two Crores Rupees. This could be done in the first step itself, however, due to the risk of rejection is involved, it is recommended to do it after incorporation.

#Step 3: Deposit Rupees Two Crore in Fixed Deposit and obtain Certificate:
After raising the capital amount, the next step is to deposit the sum of Rs.2 crore in Fixed Deposit and obtain a certificate of no lien from the bank.

#Step 4: Get all the certified Copies and complete the requirement checklist for RBI registration:
Once, you are done with step 3, the next step is to complete the requirement list for RBI registration. The requirement for Asset Finance Company Registration is as follows:

• Certified Copies of Certificate of Registration
• Certified copies of an extract of only the main object clause in the MOA relating to the financial business.

Copy of Board resolution

• A copy of Fixed deposit receipt & bankers certificate of lien indicating balances in support of Net Owned Funds (NOF).
• Bankers Report for applicant company, group companies.

#Step 5: Fill online application:
The next step is to fill the online application for NBFC registration as an Asset Finance Company (AFC). Once the online application is filed, the company gets a Company Application Reference Number.

#Step 6: Submit the Hard Copy to the Regional Office of Reserve Bank of India (RBI) office:
Once the online application is filed, the next step is to submit the hard copy to the Reserve Bank regional Office along with all the necessary supporting documents.

5.0 Total Cost for Registration

The total cost for NBFC registration is around Rs. 5 lakh to 5.5 Lakh, in which Rs.2 lakh is the professional fees and rest is the government and RBI fees.

6.0 Is Professional Fees is too high?

No, the work under registering an NBFC is far more complex and time-consuming and hence, professional fees of Rs.2 lakh is less as compared to the market rate of expert Chartered Accountants.

7.0 Documents Required initially to start the Business

If you are willing to register a Private Limited Company for NBFC registration, then you shall need at least two persons to start with. The minimum documents required for registration are as follows:

• Copy of PAN CARD
• ID Proof (Driving License, Passport, Aadhaar Card, Voter ID) - any one
• Address Proof (Bank Statement, electricity bill, Mobile Bill, Telephone Bill) –any one 
• Passport Size photo

Apart from the above, we need the following documents for registered office registration:

• Rent agreement or ownership documents
• Electricity bill
• A copy of No Objection Certificate (NOC) from the owner.

7.0 How to Proceed

Just confirm us on the email at Agam@hubco.in, that you are willing to proceed for NBFC registration, submit the documents and then we can initiate the work immediately.
Call us at +9540618336 for further clarification or questions.