NBFC Annual Compliance

NBFC business owners must adhere to annual RBI compliance, which evolves based on changing regulations and circumstances.

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NBFC Compliance Unveiled: Strategies for Ensuring Integrity and Adherence

Setting up an NBFC is tiring when bundles of formalities roll over to the desk. Handling Compliance is another add-on for such tedious tasks, which sometimes results in poor compliance handling, leading to more problems. If you intend to avail of NBFC Compliance Services, here is what you will get:

  • Reputation Protection
  • Business Continuity
  • Registration & Licensing
  • Data Protection
  • Capital Adequacy
  • KYC & AML

Details of online portals for submission of returns by NBFC’s

  1. RBI has introduced various online portals for filing of all the applicable online returns by the NBFCs. A list of online reporting portals is available on the RBI’s website.
  2. Login Credentials to access online return portals: Each NBFC is provided with a Super User Credential with defined access rights who, in turn, can create other users (with different roles such as Maker and Checker) for their entity with required access rights. Entities can monitor the status of their returns’ submissions on the portal.

Timelines for filing of Returns

NBFCs shall submit the applicable returns as prescribed by RBI, with accurate and complete data, strictly within the prescribed timelines.

The timelines for submission of returns, in general, will depend on the frequency at which the return is to be submitted. The principles for the same is tabulated below:

PeriodicityReference dateTimeline for Return Submission
Weekly Friday of the week On or before Wednesday of the following week
Fortnightly 15th and Last day (28th/ 29th/ 30th/ 31st) of the respective month Within 7 days from the Reference Date
Monthly Last day (28th/ 29th/ 30th/ 31st) of a respective month Within 15 days from the Reference Date
Quarterly Last day of the Calendar Quarter (i.e., March 31st, June 30th, September 30th, and December 31st) Within 21 days from the Reference Date
Half yearly March 31st, and September 30th Within 21 days from the Reference Date
Yearly March 31st Within 21 days from the Reference Date

Note:

  1. All audited returns, wherever applicable, shall be filed within 5 working days from the date of signing of the Auditor’s report in terms of section 134 of the Companies Act, 2013 (solo/ group level as per applicability of the return), as applicable.
  2. All ad-hoc returns/ data must be submitted within the timelines as indicated in the communication issued by the RBI.

Some of the common and important NBFC Compliances are given below

Return NameReference DateGuidelines/timelines to reportApplicability
DNBS4A31st March/ 30th June/ 30th September/ 31st DecemberWithin 21 days from the Reference Datea) NBFC-UL,

b) NBFC-ML [except Standalone Primary Dealers (SPDs)],

c) NBFC-BL with asset size of ₹100 crore and above solely or at Group level, [excluding Type-I NBFCs, and Non-Operative Financial Holding Companies (NOFHCs), P2Ps, AAs, and Mortgage Guarantee Companies]
DNBS1331st March/ 30th June/ 30th September/ 31st DecemberWithin 21 days from the Reference DateAll NBFCs
DNBS0231st March/ 30th June/ 30th September/ 31st DecemberFrequency – Quarterly Timeline - Within 21 days from Reference DateFrequency – Quarterly Timeline - Within 21 days from Reference Date
DNBS4B31st March/ 30th April/ 31st May/ 30th June/ 31st July/ 31st August/ 30th September/ 31st October/ 30th November/ 31st December/ 31st January/ 28th or 29th February as applicableWithin 15 days from the Reference Datea) NBFC-UL,

b) NBFC-ML [except Standalone Primary Dealers (SPDs)],

c) NBFC-BL with asset size of ₹100 crore and above solely or at Group level, [excluding Type-I NBFCs, and Non-Operative Financial Holding Companies (NOFHCs), P2Ps, AAs, and Mortgage Guarantee Companies]
DNBS10 - Statutory Auditor’s Certificate (SAC) Return31st MarchWithin 5 working days from the date of signing of the Auditor’s report in terms of section 134 of the Companies Act, 2013, but not later than December 31st of same year, in any case. All NBFCs and ARCs
Form A Certificate31st MarchWithin one month from the date of appointment of Statutory Central Auditor (SCA) / Statutory Auditor (SA).All NBFCs and ARCs
Financial Sound Indicator (FSI)31st March/ 30th June/ 30th September/ 31st DecemberWithin 21 days from the Reference DateAll CBs (excluding FBs)/ select AIFIs/ UCBs/ NBFCs/ ARCs
CKYCPeriodicWithin 21 days from the Reference DateWithin 10 days from the date of account relationship
CESAIWhile disbursing secured loanAs soon as possibleAll Financial Institutions
FIU-INDReport certain transaction to FIU IND agency mentioned under PMLAWithin 15 days of next month and within 7 working days of being satisfied that the transaction is suspicious All regulated entities

General Description of Returns

  1. DNBS01– Important Financial Parameters – Quarterly Return: The return contains components of assets and liabilities, profit and loss account, exposure to sensitive sectors, sectoral credit etc.
  2. DNBS02 – Important Financial Parameters (NBFCs – BL) – Quarterly Return: The return contains financial details, viz. components of assets and liabilities, profit and loss account etc. as well as for complying with various prudential norms.
  3. DNBS03 -Important Prudential Parameters – Quarterly Return: The return contains prudential norms, e.g., capital adequacy, provisioning etc.
  4. DNBS04A & DNBS04B – Asset-Liability Management (ALM) Returns: The return contains data on Asset Liability Mismatches (ALM) and Interest Rate Sensitivity (IRS), liquidity risk of exposures. Applicable NBFCs shall submit the following two ALM returns:
    • i. DNBS04A (Quarterly) – Return on Short Term Dynamic Liquidity.
    • ii. DNBS04B (Monthly) – Return on Structural Liquidity and Interest Rate Sensitivity.
  5. DNBS08 – CRILC Main (NBFCs) – Return – The return contains certain credit information in respect of borrowers who are having aggregate exposure of ₹5 Crore and above with NBFCs. In case, any entity to whom the return is applicable does not have any borrower with aggregate exposure of ₹5 crores and above for a reporting month, it shall submit a ‘NIL’ return.
  6. DNBS09 – CRILC Weekly Return on Defaulted Borrowers (RDB)- NBFCs may report certain information on large borrowers (having aggregate exposure of ₹5 crores and above with them), who have defaulted during a week or moved out of the default position, through this return on each Friday. In case, any entity to whom the return is applicable does not have any large borrower with default move-in/ move-out positions during the week, it shall submit a ‘NIL’ return
  7. DNBS10 -Statutory Auditor’s Certificate (SAC) – Yearly Return: All NBFCs and ARCs shall enable their Statutory Auditors to submit ‘DNBS10 – Statutory Auditor’s Certificate (SAC) Return’ every year. The certificate shall be based on audited books of accounts of the applicable entity, for the preceding financial year.
    The Statutory Auditor shall compile, generate and file the return, using the secure login credentials created by the applicable entity.
  8. DNBS11– Core Investment Companies (CICs) – Important Financial Parameters- Quarterly Return: The return contains data on assets and liabilities, profit and loss account, exposure to sensitive sectors, sectoral credit, etc.
  9. DNBS12-
  10. Core Investment Companies (CICs) – Important Prudential Parameters – Quarterly Return: The return contains data on Adjusted Net Worth, Provisioning, etc.
  11. DNBS13 – Overseas Investment Return: All the NBFCs (irrespective of category, business classification and asset size) shall submit information on their overseas investment and returns on a quarterly basis. In case, there are no overseas investments during the reporting quarter, a ‘NIL’ return shall be submitted.
  12. DNBS14 – Peer to Peer (P2Ps) Lending Platform (NBFCs – P2Ps) – Important Financial & Prudential Parameters: The return is to be filed by NBFCs-P2Ps and contains data on assets and liabilities, profit and loss account, prudential parameters etc.
  13. Form A Certificate: The certificate to be submitted by NBFCs regarding appointment of Statutory Central Auditor (SCA)/ Statutory Auditor (SA) in prescribed format as mentioned in the RBI’s notification on ‘Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs)’ (Reference no. DoS. CO.ARG/SEC.01/08.91.001/2021-22) dated April 27, 2021, and amendments thereto thereafter.
  14. Financial Soundness Indicators (FSI): This is a special return for furnishing consolidated FSIs to IMF. Data compilation is done as per the Guidelines issued by IMF which have been circulated to all the reporting entities

Fraud Monitoring and Vigilance Monitoring Returns

  1. FMR – I (Report on Actual or Suspected Frauds): This return captures report on actual or suspected frauds in NBFCs
  2. FMR – III (Update of Form FMR-I): This return captures progress report on frauds of large value and it is to be filed as and when any development occurs in FMR-I details.
  3. FMR – IV (Report on Dacoities / Robberies / Theft / Burglaries): This return captures consolidated information on dacoities/robberies/theft/ burglaries.
  4. VMR – I (Report on Action Plan on Anti-Corruption Measures): This return captures details on action plan on anti-corruption measures against staff. It contains information regarding preventive measures, surveillance and detection details, deterrent punitive action on vigilance cases and disciplinary cases.
  5. VMR – II (Report on the Security Arrangements): This return captures details on the security arrangements and contains information regarding number of branches considered vulnerable, branches provided with armed guards, alarm system, and other security measures provided.
  6. VMR – III (Report on Action Taken against Employees involved in Frauds and Corrupt Practices): This return captures information on action taken against employees involved in frauds and corrupt practices.

Alternate timelines for submission of select Returns

The return submission timelines mentioned above are not applicable for returns listed below. The timelines for these returns will be as follows.

Alternate timelines for submission of select Returns

S. No. Return Name PeriodicityReference Date Timeline for submission
1.Statutory Auditor’s Certificate (SAC) Return Yearly 31st March Within 5 working days from the date of signing of the Auditor’s report in terms of section 134 of the Companies Act, 2013, but not later than December 31st of same year, in any case.
2.Form A Certificate Yearly 31st March Within one month from the date of appointment of Statutory Central Auditor (SCA) / Statutory Auditor (SA).

Fraud and Vigilance Monitoring Returns (FMR/ VMR)

S. No. Return Name PeriodicityReference Date Timeline for submission
1.FMR IAs and whenDate of detection of FraudWithin three weeks from the Reference Date.
2.FMR IIIAs and whenUpdate Date/ Progress DateImmediate.
3.FMR IVQuarterly 31st March/ 30th June/ 30th September/ 31st DecemberWithin 15 days from the Reference Date.
4.VMR I
VMR II
VMR III		Quarterly 31st March/ 30th June/ 30th September/ 31st DecemberWithin 15 days from the Reference Date.

FAQ's

NBFCs are broadly classified into two categories:

Deposit-taking NBFCs (NBFC-Ds):
These NBFCs are authorized to accept deposits from the public.

Non-deposit-taking NBFCs (NBFC-NDs):
These NBFCs are not authorized to accept deposits from the public.

NBFCs are required to comply with a variety of regulations, including:

Registration and licensing: All NBFCs must be registered with the Reserve Bank of India (RBI) and obtain a certificate of registration.

Capital adequacy: NBFCs must maintain a certain minimum level of capital, depending on their size and activities.

Liquidity requirements: NBFCs must maintain certain liquid assets to meet their short-term obligations.

Asset classification and provisioning: NBFCs must classify their assets according to their riskiness and make provisions for bad and doubtful debts

Corporate governance: NBFCs must follow certain corporate governance norms, such as having a board of directors with independent directors.

Reporting and disclosure: NBFCs must submit various reports to the RBI on a regular basis, such as financial statements and prudential returns.

Starting an NBFC in India involves meeting 10 core Capital requirements as well as other mandatory compliance, obtaining necessary approvals from the RBI, and adhering to Know Your Customer (KYC) norms, among others.

NBFCs are required to have robust KYC procedures in place to verify the identity of their customers and ensure they comply with Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) regulations.

RBI has specified four layers for NBFCs. These four layers of NBFC are the base layer, Middle Layer, Upper Layer, and Top Layer.

 

The latest added category to NBFC is Investment and Credit Company (NBFC-ICC), which is the clubbed form of NBFCs categorized as Asset Finance Companies (AFC),Loan Companies (LCs) and Investment Companies (ICs).


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