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If you want to start a technology-based lending business i.e., providing loans to Individuals and businesses through a website or Mobile Application like others then this article is very useful for you. In this article, we are going to discuss NBFC-DLP (Non-Banking Finance Company -Account Aggregator-Digital Lending Platform which is newly category introduced by the RBI (Reserve Bank of India).
If you want to provide loans through a mobile application in India, you will need to obtain a license from the Reserve Bank of India (RBI) to operate as a Non-Banking Financial Company (NBFC). In order to provide loans through a mobile application, you may consider applying for registration as an NBFC-Digital Lending Platform (DLP). The RBI has recently introduced this category of NBFCs to regulate digital lending activities, including those provided through mobile applications.
As an NBFC-DLP, you will be able to provide loans to individuals and businesses using technology-driven platforms, such as mobile applications. However, it's important to note that there are specific guidelines and requirements that must be met to obtain and maintain registration as an NBFC-DLP, including minimum net owned funds (NOF), governance standards, lending practices, and reporting requirements.
Registration requirements to register NBFC-DLP
To register as an NBFC-Digital Lending Platform (DLP), you will need to fulfill the following registration requirements set by the Reserve Bank of India (RBI):
Incorporation: Your entity must be registered as a company under the Companies Act, 2013 or any previous Companies Act. The company must have a minimum net owned fund (NOF) of Rs. 2 Crore.
Directors and management: Your directors must meet the "fit and proper" criteria set by the RBI. Additionally, your company's management must have sufficient experience in the financial sector.
Technology platform: You must have a technology platform to provide lending services, which should be able to deliver end-to-end online credit assessment and loan management solutions.
Lending Policy: You need to have a Board-approved lending policy that outlines the loan products you will offer, the criteria for loan eligibility, interest rates, and other related terms and conditions.
Compliance: You must comply with all relevant laws and regulations applicable to NBFC-DLPs in India, including the RBI's Fair Practices Code, Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements, and data security guidelines.
Reporting Requirements: You must report regularly to the RBI on your operations, including loan disbursements, repayments, asset classification, and provisioning.
It is worth noting that the RBI may require additional documentation and information during the registration process, and may also conduct due diligence on your company before granting registration. It is advisable to consult a legal or financial advisor for detailed guidance on the registration process and compliance requirements for NBFC-DLPs.
Time is taken to register NBFC-DLP
The registration process for an NBFC-Digital Lending Platform (DLP) can take several months to complete. The exact time taken can vary depending on the completeness of the application, the responsiveness of the applicant, and the workload of the Reserve Bank of India (RBI).
Typically, the registration process involves multiple stages, including submission of the application, preliminary scrutiny by the RBI, due diligence by the RBI, and grant of registration. The entire process can take anywhere from 6 to 12 months or longer, depending on various factors.
To expedite the registration process, it's essential to ensure that your application is complete and accurate and that all required documentation is submitted as per the RBI's guidelines. It's also important to ensure that you comply with all the applicable laws and regulations governing NBFC-DLPs in India.
Documents required to register NBFC-DLP
To register as an NBFC-Digital Lending Platform (DLP), you will need to submit several documents along with your application to the Reserve Bank of India (RBI). The exact documents required may vary depending on the structure of your company and other factors. However, here are some of the key documents that are typically required:
Certificate of Incorporation: You will need to provide a copy of the Certificate of Incorporation of your company, issued by the Registrar of Companies.
Memorandum and Articles of Association: You will need to submit a copy of your company's Memorandum and Articles of Association (MOA and AOA), which outlines the objectives and rules of your company.
Board Resolution: A Board Resolution should be passed by the Board of Directors of the company approving the registration as an NBFC-DLP and authorizing the person(s) to file the application with the RBI.
Business Plan: A comprehensive business plan outlining the nature of your business, the proposed lending activities, the technology platform, and other relevant details.
Fit and Proper Criteria: The RBI requires a declaration of fit and proper criteria by the directors and senior management of the company.
KYC Documents: The RBI requires the KYC documents of the directors and senior management of the company.
Net Owned Funds: You will need to submit a certificate from a Chartered Accountant confirming that your company meets the minimum net owned fund (NOF) requirement of Rs. 2 Crore.
Other Supporting Documents: You may need to provide additional documents such as audited financial statements, income tax returns, and other relevant documents.
It's important to ensure that all the documents submitted are accurate, complete, and comply with the RBI's guidelines. It's advisable to consult with a legal or financial advisor who is familiar with the registration process for NBFC-DLPs to ensure that all the necessary documents are in order.
Drafting of business plan for registration of NBFC-DLP
Drafting a business plan for an NBFC-Digital Lending Platform (DLP) requires a comprehensive understanding of the market, target audience, and competition. Here's a sample business plan that outlines the key aspects that you should include in your plan:
Executive Summary: This section should provide a brief overview of your business plan, highlighting the key points.
Market Analysis: In this section, you should analyze the market for digital lending platforms, including the size of the market, trends, and potential growth opportunities. You should also identify your target audience and their needs.
Products and Services: Describe the lending products and services that your DLP will offer, including the loan amount, interest rates, and repayment terms. Explain how your platform will differ from existing players in the market.
Technology Platform: Describe the technology platform that you will use to deliver your lending services, including the features, functionalities, and security measures.
Marketing and Sales Strategy: Outline your marketing and sales strategy, including the channels that you will use to reach your target audiences, such as social media, email, and affiliate marketing. Explain how you will acquire and retain customers.
Risk Management: Describe the risk management policies and procedures that you will implement to manage credit risk, operational risk, and other risks associated with lending.
Financial Projections: Provide financial projections for the next 3-5 years, including revenue, expenses, profit/loss, and cash flow statements.
Management Team: Describe the management team, their qualifications, and their experience. Explain how the team will manage the operations of the DLP.
Regulatory Compliance: Outline the regulatory requirements for operating as an NBFC-DLP, and explain how you plan to comply with them.
Funding Requirements: Explain the funding requirements for setting up and operating the DLP, including the capital adequacy requirements.
In conclusion, the business plan should provide a comprehensive overview of your NBFC-DLP, including the market analysis, lending products, technology platform, marketing and sales strategy, risk management, financial projections, management team, regulatory compliance, and funding requirements.
Is it mandatory that directors of the company must have good credit scores and finance background to register NBFC-DLP?
While it is not mandatory for the directors of a company to have a good credit score and finance background to register an NBFC-DLP, it is highly recommended. The Reserve Bank of India (RBI) expects the directors and senior management of an NBFC to be "fit and proper" individuals with the necessary qualifications, experience, and integrity to run the business.
Having a good credit score is an important aspect of the fit and proper criteria, as it reflects the individual's financial history and ability to manage credit. A low credit score could raise concerns about the director's ability to manage the financial affairs of the NBFC-DLP.
Similarly, having a finance background is also important as it demonstrates the individual's knowledge and expertise in financial management, accounting, and regulatory compliance. This is especially important for an NBFC-DLP, which operates in a highly regulated and complex financial environment.
That being said, the RBI does not explicitly require the directors to have a certain credit score or finance background to register an NBFC-DLP. However, it is important for the directors to have the necessary skills, knowledge, and experience to effectively manage the business and comply with the regulatory requirements.
Is there any Loan Limit under NBFC-DLP?
The loan limit for an NBFC-DLP (Non-Banking Financial Company - Account Aggregator - Digital Lending Platform) may vary depending on various factors such as the company's financial capacity, risk appetite, and regulatory requirements.
However, as per the RBI's guidelines, the aggregate exposure of an NBFC-DLP to a single borrower or group of borrowers must not exceed 10% of the NBFC-DLP's capital funds. Also, the total loan amount granted by the NBFC-DLP to a borrower should not exceed Rs. 2 crores.
Additionally, the NBFC-DLP must comply with other prudential norms set out by the RBI, such as income recognition, asset classification, provisioning, and capital adequacy, which may impact the company's loan limits.
Overall, the loan limit for an NBFC-DLP is subject to various regulatory and prudential norms, and the company must ensure compliance with these guidelines while determining the loan limit for borrowers.
However, it is important to note that these limits are subject to change from time to time and may differ based on the RBI's guidelines and the NBFC-DLP's own risk management policies. Additionally, the NBFC-DLP may also set its own internal lending limits based on its risk appetite and lending strategy.
About the Author
Mr. Satender Saini is a highly accomplished corporate lawyer and the founder of Vakilkaro.com. With his extensive experience and expertise in corporate law, he has helped numerous clients navigate complex legal issues and achieve their business goals.
As a passionate and dedicated legal professional, Mr. Saini has made a significant impact in the legal industry. He is known for his in-depth knowledge of corporate law, sharp analytical skills, and ability to provide strategic legal advice to clients across a range of industries.
Under his leadership, Vakilkaro.com has become a trusted name in the legal services industry, providing high-quality legal solutions to individuals and businesses of all sizes. Mr. Saini's vision and commitment to excellence have helped Vakilkaro.com to grow rapidly and establish a strong reputation in the market.
Overall, Mr. Satender Saini is an outstanding corporate lawyer, a visionary entrepreneur, and a true leader in the legal industry. His contributions to the field of law and business have been immense, and he continues to inspire and guide others with his knowledge and expertise.
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+91 9828123489
help@vakilkaro.co.in