NBFC Revival & Licence Cancellation Appeal:-
An NBFC licence may seem to be like an absolute loss to any business entity. But, fortunately, the Reserve Bank of India (RBI) allows companies who are willing to turn the tables and get back to being compliant again. If you have been de-registered because of non-compliance issues or are not very clear on the process of filing an appeal against your NBFC license cancellation, here is your guide providing all the information you need for revival of NBFCs and appeals against NBFC license cancellations.
What Does an NBFC Mean?
A Non-Banking Financial Company (NBFC) in India is the company registered under Companies Act, 2013, that indulges itself in financial activities such as loans and advances, acquisition of shares/stocks/bonds/debentures, and acceptance of deposits under any scheme. In contrast to banks, NBFCs fall within the ambit of RBI, however, do not possess the banking license. This is the very reason why NBFCs have to comply with the RBI norms.
Revival of NBFC License Post Cancellation
It is within the jurisdiction of the RBI to cancel the certificate of registration of an NBFC when the company does not carry out the business in accordance with the statutes or violates any of the compliance norms. There are so many instances where a company can apply for the revival of its NBFC license.
In Which Circumstances Does the RBI Cancel an NBFC License?
RBI generally steps in and cancels a certificate of registration when it finds the NBFC isn't operating in the public interest or isn't following the law. Common triggers include:
- The NBFC has stopped carrying on business as an NBFC.
- It does not fulfil the terms and conditions on which it was registered, including the extra conditions put down by RBI.
- It does not meet the capital maintenance requirement.
- It violates instructions from the RBI.
- It is not able to pay back the deposit amount.
- It does not follow C-KYC/CIC procedures.
- Its operations run contrary to public interest.
- It hasn't filed mandatory annual or quarterly reports on time.
Importantly, before cancelling a licence, RBI is required to give the company an opportunity of being heard, except where the cancellation is driven purely by larger public interest concerns.
How the NBFC Revival Process Works
If your NBFC's registration has been cancelled:
It is your statutory right to contest the order, and here is how you can go about doing it:
The aggrieved company can appeal against the decision of the RBI to cancel the certificate.
This appeal is made to the Department of Financial Services through Section 45-IA (7) of the Reserve Bank of India Act, 1934, which is the Appellate Authority. The appeal should be filed within 30 days from the date of receiving the order for cancellation.
Another alternative is that a writ petition may be filed in the High Court under Article 226 of the Constitution.
What to Check Before You Draft Your Appeal
A well-prepared appeal stands a far better chance of success. It would be wise to check the following before filing:
- Your compliance status with respect to the Registrar of Companies (ROC)
- Your RBI returns, especially NBS-9 reports
- Your company’s tax audit report
- The quality of your assets and liabilities
- If you qualify for the Minimum Net Owned Fund (MNFO), which is currently at ₹2 crore
- A solid, justified reason behind the appeal
Preparation of these basic things in advance will help your case greatly and reduce the likelihood of being rejected again.
What Professionals Bring to the Table
As NBFC revival and appeal processes require the application of both RBI regulations and company laws, along with proper timing, even one mistake in filing or the lack of good reasons behind the appeal may ruin your whole case. That is why professionals will help you audit the previous filings and prepare a solid appeal.
How CorpZo Can Help?
Our professionals at CorpZo assist business entities in different cities with regard to NBFC Revival and Licence Cancellation Appeal. Our team of CA, CS, and law experts will guide you through the process, from compliance audit to submitting the appeal, along with all relevant documentation, to help your NBFC come back to life.
In case your NBFC’s registration gets cancelled, don’t delay beyond the 30 days appeal period. Please contact us immediately.