Funding in NBFC

Package Inclusion :

  • Due diligence of Target company.
  • Object & Name change.
  • Assets in company Valuation.
  • Assistance in filing application for change in management
  • Business plan and Market research
  • Advisory on annual compliance
  • Assistance in development of Underwriting and Risk assessment model

Funding in NBFC

NBFC Takeover

RBI has simplified the NBFC takeover can process and a takeover deal can be executed in 45 to 60 working days. Takeover of NBFC is easier than Fresh registration of NBFC.

Acquirer of NBFC should first conduct due diligence and overview the financials of the target company. Once The target NBFC is go to go and to execute acquisition of the said NBFC, MOU to be signed with some advance money.

What is Takeovers in the financial terms, means the purchase of one business entity by another. This can be either friendly takeover, wherein the seller entity consents to sell its assets to the acquirer entity. Or on the other hand, this can take form of hostile takeovers, where the acquirer entity deliberately and secretly acquires the control of the other entity. In both the conditions, the balance sheet of the seller entity stands null after all its assets and liabilities are transferred to the acquirer.

The concept of mergers and takeovers is not new to the economic world. Many business houses have experienced either a remarkable success or disheartening breakdown after such arrangements. NBFCs, being considered as near substitute to the conventional banks, have also not been left untouched by the takeover and acquisition drives. The Reserve Bank of India laid down the procedure for the Takeover of NBFCs so as to prescribe a systematic system eliminating every bias and ambiguity.

In case of the friendly takeovers of the NBFCs, the first step in the process is to sign the MOU with the proposed company after the decision for NBFC takeover is been approved by the Board of both the companies. Once the Board has consented for the aforesaid takeover, the next step in the process is to seek RBI’s approval for the subject.

What is NBFC Takeover Procedure / NBFC for Sale Procedure

When we are talking about the RBI’s approval for NBFCs arrangements and takeovers, the minor changes in the management of NBFCs or minor acquisition of control of NBFCs is kept outside the meaning of the takeovers.

Prior approval from the Reserve Bank of India is taken in the following conditions of NBFCs arrangements, failing which the whole process shall be considered null and void:

Prior approval of RBI will not be required in following circumstances:

Documents Checklist for NBFC Takeover

RBI prior approval from RBI is require for NBFCtakeoverin India and need to justify the purpose of any takeover or acquisition of control, the next step to be followed is to make an application to the RBI on the letterhead of the company, for the endowment of the aforesaid approval, along with the following necessary documents:

Thereafter, the application shall be submitted to the Regional Office of the Department of Non-Banking Supervision in whose control the Registered Office of the NBFC is located for obtaining the prior approval before undertaking such arrangements. The Reserve Bank may arouse various queries or ask for clarifications regarding various points mentioned in the application for approval. All such queries shall be answered in the timely manner in order to avoid an undue delay in processing the application from the RBIs side. The approximate time of around two to three months is required for getting the approval, depending up on case to case basis.

Requirement of Prior Public Notice in case of change in management/control

After getting RBI's approval for concerned takeover, a public notice shall be given in one leading national and one leading local newspaper at least 30 days prior to such sale of shares, or transfer of control, whether with or without share transfer.

The public notice shall indicate the following information in comprehensive language:

Preparation of Share Purchase Agreement

After the public notice of the takeover, the Share Purchase Agreement is prepared and signed by the acquirer and transferor, the management of the transferor company is handed over to the acquirer and the consideration remaining, if any, shall be paid off within 31 days of the public notice in the newspaper or as mutually agreed by all the parties.

Transfer of all assets and liabilities of Transferee Company to the Transferor Co

Subsequent to the signing of the Share Purchase Agreement,the assets of the transferor company present in the balance sheet will be discharged and liabilities will be paid off and Acquirer will just receive a clean bank balance in the company's name calculated on the basis of net worth as on the date of the takeover.

Impact of NBFC on Indian Economy

In the current scenario, the NBFC sector is acting as a catalyst to the overall economic development of the country. In order to provide necessary regulatory support to the segment and also to ensure financial stability in the long run, the RBI is continuously trying to bring necessary changes in the NBFC regulatory space. A lot of changes in their operations, management and regulations have been witnessed by NBFCs, pursuant to the proactive role of the financial market in the Indian economy. Keeping the same in mind, the RBI has liberalized the compliances and governance requirements of NBFCs particularly the non-deposit taking NBFCs having no public funds and no customer interface.


The whole process of NBFCs takeover is governed by the RBI regulations and the notifications issued by it from time to time in this regard.Although the concept of NBFCs takeovers is still in its infant stage, but the RBI has ensured that the process to be followed shall be systematic and comprehensive. All the compliances, as prescribed in this behalf shall be duly satisfied. The acquirer shall be well-versed with all the information connected with the transferor in order to avoid any delay in the process.

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