NBFC Buy Or Takeover

NBFCs are companies registered under the Companies Act of 2013, which are engaged in the business of acquiring shares, loans, and advances, stocks, bonds, and debentures, or securities issued by the government or local authorities, or marketable securities, hire-purchase business, or insurance business, except for the financing of institutions whose primary businesses are agricultural activity, the sale and purchase of goods (not securities), industrial activity, or commercial activity. Non-banking financial companies (residuary non-banking company) are companies that receive deposits under the scheme or arrangements in a lump sum or in installments by way of contributions or in any other way.  The NBFCs are required to obtain a Certificate of Registration before conducting financial services in India. For the purpose of RBI NBFC licensing, go through the procedure that needs to be followed.

Functioning of NBFCs

The principal business and financial activities of the nonbanking financial company and the financial assets of the company represent larger than 50% of the total assets and income that constitute more than 50 percent of the gross income of the company. The company that fulfills the criteria will be registered as an NBFC by the RBI. The principal businesses of the NBFCs are not defined in the RBI Act. As per the RBI, basically, these companies are involved in agricultural operations, industrial activities, the purchase and sale of agricultural goods, and providing services relating to the sale, purchase, or construction of immovable property as their principal business or business in a small way that are not regulated by the Reserve Bank. The NBFC Directions 2015, revised by RBI, state that every NBFC, whether it is accepting deposits or not, will be covered under the new direction, which is more stringent as compared to the earlier directions for the Buy/Buy/Takeover of an NBFC.

The Difference That Lies In The Functioning Of The NBFCs And Banks Are 

• NBFC cannot accept demand deposits.
• NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn from it.
• Deposition of the insurance facilities and deposit insurance and credit guarantee corporation that is not available to the depositors of NBFCs unlike in the bank's case.

The registration of the NBFCs with the RBI is not mandatory, as per the Section 45-IA of the RBI Act, 1934, no Non-banking Financial company can commence or carry on the business of the non–banking financial institutions without

• Obtaining the certificate of registration from the bank, and without having net owned funds of Rs. 2 Crore (10 crores as per the recent amendment), in terms of powers given to the Bank.

As per the regulatory structure for the NBFCs through the RBI, the NBFCs consist of four layers depending on their size, riskiness, and activity. The  NBFCs of the lowest category are known as the NBFC Baselayer (NBFC-BL), the NBFCs in the middle layer are known as the NBFC Middle layer (NBFC-ML) and the NBFC of the upper lawyer are known as NBFC upper layer (NBFC-UL), and the top layer is considered as empty and is known as NBFC-TL. For More Information go to our other page,

And, through the recent guideline provided by the RBI, the Regulatory Minimum Net owned fund (NOF) for NBFC-ICC, NBFC-MFI, and NBFC factors are increased to  10 crores by the end of March 31, 2027. The scenarios are:

There are certain NBFCs such as NBFC-P2P, NBFC-AA, and NBFCs with no public funds and no customer interface, for which the net owned fund shall be Rs. 2 Crore only. 

And, there is no such change in the Existing Regulatory minimum NOF for the NBFCs-IDF, IFC, MGC, HFC, and SPD.

• Through the acquisition process, the Private limited companies must have the capital of 10 crores which must be reserved for the period of registration with the RBI.
• Acquisition process is very Less time Consuming 
• The New NBFC registration requires at least 12 to 24 months for the grant of registration.
• The new NBFC licensing is done at the RBI headquarters in Maharashtra
• Less paper work in the acquisition and change in management of the existing NBFCs.
• The case study says, the acquisition process normally takes 3 to 4 months only.

Things Need To Be Kept In Mind While Undergoing Acquisition Of An NBFC:

• Information and documents relating to the proposed promoter and directors
• Due diligence report of the company.
• Funds for the acquisition of the company
• Financial statements for the last 3 years of the company
• Legal documents of the company
• Other details as per the RBI guideline

The acquisition of RBI registered NBFCs is preferable and is in high demand after the direction of the RBI for the Mandatory provision for different types of NBFCs which needs to have at least 5 crores by the end of 2025 and 10 crore by the end of 2027 of all of the registered NBFCs, which makes them vulnerable NBFCs sell off their businesses and makes it easier for those who are willing to take over NBFCs. 

Buy/Takeover of the NBFCs

Following are the steps next to be taken for processing of Buy/Buy/Takeover of an NBFC

For the acquisition of an NBFC, permission from the RBI is required.

• The Buy/Takeover or acquisition of an NBFC either results in a change in management or not.
• The change in shareholding of an NBFC includes a progressive increase over time which results in the acquisition of shareholding/paid-up equity capital of 26 percent or more of the company, however, if the company shareholding goes beyond 26% due to buyback of share or reduction in your capital with the approval of the competent court. The same is required to be informed to the RBI within 1 month of acquisition.
• If the management of the NBFC is undergoing a change of more than 30% of the directors (except independent director) of the company in such cases prior approval of the directors who are getting reelected are not required.
• Instead of the above-mentioned norms, as per the systemically important non-banking financial (non-deposit accepting holding) companies prudential norms (Reserve Bank directions) 2015, non-systemically important non-banking financial (non-deposit accepting or holding) companies prudential norms get prayer approval from the bank for which it will have to sign and submit an application with the company letterhead along with a few attached documents, which are:
• The information regarding the proposed directors or shareholders.
• Sources of funds of the proposed shareholder.
• Declaration by the proposed shareholder that he is not in connection with any unincorporated body which is accepting deposits.
• Declaration by the shareholder that they are not associated with any other company and application of registration of which has already been rejected by the RBI.
• A declaration by the proposed holder that you are not a criminal or ever Indulged in any criminal case including the offense under section 138 of the negotiable instrument act.
• Bankers reports of the proposed directors or shareholders.

The submission shall be made to the original office of the department of nonbanking supervision, under whose jurisdiction the registered office of the NBFC is located.

General Public Notice Is Required To Be Given Before The Change In Control Or Take Over

General public notice of at least 30 days It will be given before the share transfer and Buy/Takeover of ownership, whether with or without the transfer of shares. The public notice shall be given by the NBFCs and other parties jointly, with the permission of the Reserve Bank of India.

The notice must be written in such a way that it mentions the intention to sell a transfer of ownership while also providing information about the transfer and the reason for the transfer of ownership. The notice shall be published in prominent places and in the leading newspapers of the nation and locality where the NBFC is located, along with the location of the registered office.

The directions will take immediate effect.

As per the RBI guidelines, a violation of the procedures would lead to the cancellation of the COR that is provided by the RBI.

Procedural Steps That Needs To Be Followed to buy/Takeover an NBFC As Mentioned Above:

• Name
• Designation
• Nationality
• Age (DOB)
• Business address (of the project)
• Residential address (of the Director)
• E-mail address/Telephone number
• PAN number under Income Tax act
• Director Identification Number
• Social Security number/Passport no.
• Educational/Professional qualifications
• Professional achievements relevant to the job
• Line of business or vocation 
• Any other information relevant to the Company
• Name of the Companies where the person has had the post of Chairman/Managing Director/Director/Chief Executive Officer (CEO)
• Name of the regulators (RBI, SEBI, IRDA, PFRDA, NHB or other foreign regulator)  of the entities mentioned in which the person is holding directorships.
• Name of the NBFCs, with which the person is associated as Promoter, MD, Chairman or director including a Residuary NBFC, which is prohibited from accepting deposits/prosecuted by RBI?
• Details of the Prosecution, pending or commenced or resulting in conviction in the past against the person and/or against any of the entities he is associated with for violation of economic laws and regulations.
• Cases of the persons or relatives or the companies with which the company is associated, have been in the last five years in respect of the credit facilities obtained from the entity or bank. 
• The professional associations member, body, details of the disciplinary action, pending or commenced resulting in conviction in the past against him, whether she was banned from doing business at any time
• Details of the person suffering with the disqualifications as per Section 164 of the Companies Act, 2013.
• The person or the Companies, he is associated with, has been subjected to the investigation at the instance of the Government Department or agency
• If the person has been found guilty of violations of rules, regulations, legislative requirements by Custom/ Excise/Income tax/Foreign Exchange/other Revenue Authorities, with the particulars.
• Business experience in NBFC 
• Equity share in the company
• Total number of shares 
• Face value of the company
• Total percentage of paid up equity share capital of the Company 
• Name of the Companies, Firms, and proprietary concerns with which the person holds substantial interest 
• The principal bankers to the concerns at 26 or above.
• Details of the overseas bankers
• Number of directorships  held by the person that should not exceed the prescribed limit of  20 as per the Section 165 of the Companies Act, 2013

Connect with our expert. For the Buy/Takeover of an NBFC that has already been registered under RBI regulations, there is an elaborate procedure and several compliances. Our expert team will assist you in locating the appropriate non-banking financial companies:

• We help you to identify the existing NBFCs 
• We provide advisory services for the acquisition of the NBFCs.
• Formation of the deal for the sale proceed with the NBFC 
• Negotiation of the deal and formation of the Memorandum of Understanding (MOU) on the basis of the existing norms, for the Signing of documents and 
• Finding out the legitimacy of the existing Non banking Financial company (NBFCs)
• Help in finding out the RBI norms compliance and pending cases.
• Help in the  Buy/Takeover process and change in the Management of the NBFC.
• Help in the Transfer of the equity of the NBFC.
• Making due diligence of the Stakeholders and director.