Non-Banking Financial Companies engage in activities such as collecting deposits, offering loans and advances, and investing in stocks, equities, and other marketable securities. These entities are registered under the Companies Act, 2013. While NBFCs perform lending activities as banks, they differ from banks in various aspects.
NBFC annual compliances have evolved and become more intricate over time. The Reserve Bank of India has introduced stringent compliance requirements. NBFCs are mandated to submit various returns to the RBI, focusing on aspects like deposit acceptance, Asset Liability Management (ALM), and Prudential Norms Compliance, in line with the Master Direction, NBFC Returns (Reserve Bank) Directions, 2016. These master directions lay the foundation for RBI-compliant and secure NBFC operational practices. Given the complexity of NBFC annual compliances and returns, it’s crucial to thoroughly understand and adhere to these guidelines to mitigate potential penalties.
Understanding NBFC Annual Compliances in India
In India, Non-Banking Financial Companies (NBFCs) are subject to specific NBFC annual compliances imposed by the RBI. These requirements encompass various aspects of regulatory reporting and data submission. One of the notable changes in recent times in the NBFC annual compliances is the migration of the supervisory return online process of filing from the COSMOS platform to the XBRL system. This transition has introduced new prerequisites for NBFCs to adhere to when filing returns on the XBRL portal.
Key Requirements for NBFC Annual Compliances on the XBRL Portal
To meet the NBFC annual compliances and successfully file returns on the XBRL portal, NBFCs must undertake the following steps:
1. Obtain User ID and Password from the Reserve Bank of India (RBI):
NBFCs must initiate the compliance process by obtaining a unique User ID and Password from the RBI. These credentials are essential for accessing and using the XBRL portal.
2. Installation of XBRL RBI File:
NBFCs are required to install the XBRL RBI file, which serves as the software interface for preparing and submitting financial and supervisory data in the XBRL format. This installation is a crucial step to ensure accurate reporting.
3. Regular Profile Updates on the XBRL Portal:
Maintaining an up-to-date profile on the XBRL portal is essential for NBFCs. Regularly updating the profile information ensures that the RBI has accurate and current details about the NBFC, facilitating effective communication and compliance monitoring.
Adhering to these requirements is vital for NBFC annual compliances in India to fulfill their regulatory responsibilities and ensure seamless compliance with the XBRL-based reporting system mandated by the RBI.
Different Types of NBFCs Based on Activities
Before discussing the NBFC annual compliances, let’s first see the types of NBFCs. The various types of NBFCs as per activities are:
1. Infrastructure Finance Company (IFC):
IFCs primarily focus on providing financial assistance and funding for infrastructure development projects. Their activities are directed towards supporting the growth and sustainability of infrastructure projects in various sectors.
2. Investment and Credit Company (ICC):
ICCs engage in both investment and credit operations. They are involved in making investments in securities as well as extending credit facilities to individuals and businesses.
3. Systemically Important Core Investment Company (CIC):
CICs are specialised NBFCs that predominantly invest in the equity of other companies and have a significant influence over these companies. They are considered systemically important if their asset size meets the regulatory threshold.
4. NBFC- Non-Operative Financial Holding Company (NOFHC):
NOFHCs are entities established to act as holding companies for banks in India. They are part of the regulatory framework designed to separate the ownership and control of banks from other financial activities.
5. Mortgage Guarantee Companies:
Mortgage Guarantee Companies provide insurance and guarantee services related to mortgage loans. They offer protection to lenders against default by borrowers in mortgage transactions.
6. NBFC-Factors:
NBFC-Factors are specialised institutions that engage in factoring operations. They purchase trade receivables from businesses, providing them with immediate liquidity.
7. NBFC-Microfinance Companies (MFIs):
NBFC-MFIs primarily focus on extending microloans to low-income individuals and micro-entrepreneurs. Their mission is to promote financial inclusion and provide access to credit to underserved populations.
8. Infrastructure Debt Fund Non-Banking Financial Company (IDF-NBFC):
IDF-NBFCs are entities established to facilitate the financing of infrastructure projects by issuing bonds and debentures. They play a vital role in channelling long-term funds into infrastructure development.
Different Types of NBFCs Based on Liabilities
The various types of NBFCs as per liabilities are:
1. Deposit Accepting NBFCs:
Deposit Accepting NBFCs are authorised to accept deposits from the public, subject to certain regulatory restrictions and conditions. They offer a limited range of banking services, primarily accepting deposits and providing loans.
2. Non-Deposit Accepting NBFCs:
Non-Deposit Accepting NBFCs are not permitted to accept deposits from the public. They rely on other sources of funding, such as loans from financial institutions, for their operations.
3. Other Non-Deposit Holding Companies:
This category includes NBFCs that do not accept deposits and primarily serve as holding companies for their investments in various businesses.
NBFC Annual Compliances & Returns in India
Below are the monthly, quarterly, and NBFC annual compliances and returns:
Monthly Compliance:
The monthly compliance list for NBFCs is as follows:
| Form | Type of NBFCs | Description | Due Date |
| DNBS-04B | NBFCs-NDSI and NBFCs-D | Captures details of mismatch in expected future cash inflows & outflows based on maturity pattern of assets and liabilities, and interest rate risk for NBFCs-NDSI. | Within ten days from the end of every month. |
| NESL | All NBFCs | Requires reporting of Financial Debt to NESL. | Within a week from the end of the succeeding month. |
| CIC Reporting | All NBFCs | Requires reporting of loans to all 4 Credit Information Companies (CICs). | On or before the 10th day of the succeeding month. |
Note: NESL – Non-Convertible Debentures Electronic System Ledger; CICs – Credit Information Companies
Quarterly Compliances
The quarterly compliance list for NBFCs is as follows:
| Form | Type of NBFC | Description | Due Date |
| DNBS-01 Return | NBFCs-D & NBFCs-NDSI | Captures financial points, including components of Assets and Liabilities, P&L accounts, and Exposure to sensitive sectors for NBFC-NDSI and NBFC-D. | 15th April; 15th July, 15th October and15th January |
| DNBS-03 Return | NBFCs-NDSI & NBFCs-D and Non-NDSI (asset size > 100 cr.) | Captures compliance with prudential norms such as Capital Adequacy Asset (CAA), Asset Classification, Provisioning, NOF for NBFC-Deposit-taking & NBFC-NDSI. | 15th April; 15th July; 15th October and 15th January |
| DNBS-04A Return STDL (Short Term Dynamic Liquidity) | NBFCs-D & NBFCs-NDSI and Non-NDSI (asset size > 100 cr.) | Captures details of mismatch in expected future cash inflows and outflows based on business projections. | 15th April; 15th July and 15th October and 15th January |
| DNBS-06 | RNBCs | This captures the important financial details like components of assets as well as liabilities and compliance with various prudential norms for RNBCs. | 15th April; 15th July and 15th October and 15th January |
| DNBS-07 | ARCs | Captures financial parameters and operational details such as assets (NPA) acquired, acquisition cost, recovery status, for ARCs. | 15th April; 15th July; 15th October; 15th January |
| DNBS-08- CRILC Main Return | NBFCs-NDSI & NBFCs-D and NBFC Factors | Captures credit details on aggregate Exposure of > 5 crores to a single borrower. | 21st April; 21st July; 21st October and 21st January |
| DNBS-11 | NBFC-CICs | Captures financial points, including components of Assets and Liabilities, P&L Account, and Exposure to sensitive sectors, for CIC-ND-Sis. | 15th April; 15th July; 15th October and 15th January |
| DNBS-12 | NBFC-CICs | Captures compliance with prudential norms such as Asset Classification, Capital Adequacy, Provisioning, NOF, etc., for CIC-ND-Sis. | 15th April; 15th July; 15th October and 15th January |
| DNBS-13 | All NBFCs | Captures information on the Foreign Investment in all NBFCs having foreign investment. | 15th April; 15th July; 15th October and 15th January |
| DNBS-14 | NBFC-P2Ps | Captures financial information, including components of assets & liabilities and compliance with several prudential norms for NBFCs-P2P. | 15th April; 15th July; 15th October and 15th January |
NBFC Annual Compliances
The NBFC annual compliances list is as follows:
| Form | Type of NBFC | Description | Due Date |
| DNBS-02 Return | Non-NDSI NBFCs | Captures important financial details like components of assets as well as liabilities and compliance with several prudential norms for the non-deposit taking non-NDSI NBFCs. | On or before the 30th of May (either provisional or audited basis); if provisional filled, then file audited in 30 days of finalisation of financials. |
| DNBS-010 | All NBFCs & ARCs | Ensures continuous regulatory compliance for all Non-Banking Financial Companies (NBFCs). | Within 15 days from finalising the balance sheet date but not later than 31st October. |
Additional NBFC Annual Compliances
The additional NBFC annual compliances list for NBFCs is as follows:
| Form | Type of NBFC | Description | Due Date |
| DNBS-05 Return | Rejected NBFCs | Captures details concerning NBFCs that accepted public deposits and had their Certificate of Registration (CoR) rejected by the Reserve Bank of India. | As and when CoR is rejected by the Reserve Bank of India |
| DNBS09-CRILC SMA Details | NBFCs-NDSI & NBFCs-D & NBFC-Factors | Captures details for all NBFCs-D, NBFCs-NDSI & NBFCs-Factors, along with aggregate Exposure> 5 cr to single borrower and reported in SMA-2 for the day. | As and when such account is classified (de-classified) as SMA-2 |
| CKYCR | REs (Regulated Entities) | Requires every regulated entity (including NBFCs) to conduct KYC while disbursing loans or creating account relationships. | Within ten days from the date of account relationship |
| CERSAI | All Financial Institutions | Requires reporting to CERSAI while disbursing secured loans for the first change over the secured property. | As soon as possible to secure the first change over the secured property |
| FIU-IND | All Regulated Entities | Requires reporting certain transactions to the FIU-IND agency as mentioned under Rule 3 of the concerned PMLA Rules 2005. | Within 15 days of succeeding month and within 7 working days of being satisfied that the transaction is suspicious |
Prudential Regulation of RBI: Key NBFC Compliances
In addition to the specific NBFC compliances detailed earlier, the Reserve Bank of India (RBI) enforces prudential regulations for non-banking institutions to maintain the stability and integrity of the financial system. These regulations encompass various aspects of financial operations and risk management.
1. Accounting of Investments:
NBFCs must establish an investment policy, approved by their Board of Directors (BOD), which outlines criteria for classifying investments as current or long-term. This policy serves as a guiding framework for investment decisions.
2. Aggregation of Multiple NBFCs:
For the purpose of assessing compliance with the asset size limit of Rs. 500 crores, all NBFCs are jointly aggregated. This ensures that the cumulative assets of multiple NBFCs under common ownership or control are considered together.
3. Prohibition of Loans Against Company Shares:
NBFCs are prohibited from extending loans or credit facilities against their own shares. This regulation safeguards against potential conflicts of interest and risk exposure.
4. Policy for Demand or Call Loans:
NBFCs intending to offer Demand or Call Loans must establish a comprehensive policy for this purpose, which must be implemented by the company.
5. Classification of Assets:
Applicable NBFCs are required to categorise their assets into the following classes:
- Standard Assets
- Sub-Standard Assets
- Loss Assets
- Doubtful Assets
6. Disclosure in the Balance Sheet:
NBFCs are mandated to include separate provisions for doubtful or bad debts and depreciation in investments in their balance sheets. This enhances transparency in financial reporting.
7. Provision for Standard Assets:
Each relevant NBFC must set aside a provision amounting to 0.25% of the outstanding standard assets as a risk mitigation measure.
Penalties for Non-Compliance of NBFC Annual Compliances
The penalties for non-compliance of NBFC annual compliances vary depending on the nature of non-compliance. The most significant consequences may include the revocation of the NBFC licence or even the forced closure of the company. Ensuring compliance with these prudential regulations is imperative for non-banking financial companies in India to maintain their operational integrity and avoid punitive measures enforced by the RBI.
Final Thoughts
NBFC Annual Compliances play a crucial role in the financial sector, engaging in diverse activities such as deposit collection, loan disbursement, and investments. Governed by the Companies Act, 2013, NBFCs adhere to specific NBFC annual compliances checklist to ensure regulatory adherence. Regulatory oversight is provided by the Reserve Bank of India and non-compliance can lead to penalties and even the revocation of the NBFC Registration Certificate.
Understanding and adhering to these guidelines, including the recently transitioned XBRL-based reporting system, is vital to mitigate penalties. NBFCs must also comply with prudential regulations, addressing aspects like asset classification, investments, and disclosure in balance sheets. Strict adherence to these guidelines is crucial to maintain the stability and trust in the financial system while fostering the growth of NBFCs in India.
