How to Convert a Fintech Startup into an NBFC

The rapid growth of digital finance has enabled fintech startups to revolutionize how financial services are accessed and delivered. From digital lending platforms to payment gateways and credit facilitation apps, fintech firms are challenging traditional banking models. However, as these startups scale, regulatory compliance becomes increasingly important — especially for those involved in credit, lending, or asset financing.

One of the most effective ways for a fintech startup to legitimize and expand its financial operations is by becoming a Non-Banking Financial Company (NBFC). This move not only aligns the business with regulatory standards but also builds greater trust with investors, partners, and customers.

This article explains how to convert a fintech startup into an NBFC, including a step-by-step guide to the NBFC registration process and how to apply for NBFC registration online.

What is an NBFC?

A Non-Banking Financial Company (NBFC) is a financial institution that offers services similar to a bank but does not hold a banking license. NBFCs are regulated by the Reserve Bank of India (RBI) and can engage in various financial activities such as:

• Lending and credit facilities

• Investment in securities

• Leasing and hire-purchase

• Microfinance

• Asset financing

NBFCs play a critical role in financial inclusion by catering to underserved markets that traditional banks may not reach.

Why Convert a Fintech Startup into an NBFC?

If your fintech startup is involved in lending, peer-to-peer financing, consumer credit, or any other financial activity that resembles banking, then RBI regulations require you to operate under the proper legal framework. Here’s why fintechs consider NBFC registration:

1. Regulatory Legitimacy: Operating under the RBI’s guidelines enhances your credibility.

2. Access to Capital: Many investors prefer NBFCs due to their regulated structure.

3. Business Scalability: NBFC status allows you to expand credit offerings and tap new financial segments.

4. Strategic Partnerships: Banks and financial institutions are more likely to partner with registered NBFCs.

Key Requirements for NBFC Registration

Before initiating the NBFC registration process, fintech startups must meet the following eligibility criteria set by the RBI:

1. Company Incorporation

The entity must first be registered as a private limited or public limited company under the Companies Act, 2013. NBFC registration is not granted to LLPs or partnership firms.

2. Minimum Net Owned Fund (NOF)

The company must have a minimum Net Owned Fund (NOF) of ₹10 crore (as per recent RBI updates). The NOF must be equity in nature and must be maintained continuously.

3. Clean Credit History

The promoters and directors of the fintech startup must have a clean credit history with no record of willful default or financial fraud. CIBIL reports are typically evaluated during the NBFC registration process.

4. Business Plan

The company must have a robust business plan that clearly outlines its financial activities, target market, risk management strategies, and compliance policies.

Also Read: Who is Eligible to Apply for Shares Recovery from IEPF in India?

Step-by-Step NBFC Registration Process

Here is a step-by-step breakdown of how to convert your fintech startup into an NBFC:

Step 1: Incorporate as a Company

If your fintech is not already a registered company under the Companies Act, the first step is incorporation as a private or public limited company. You will need:

• Digital Signature Certificate (DSC)

• Director Identification Number (DIN)

• Name reservation via RUN (Reserve Unique Name)

• Filing of SPICe+ form for incorporation

Once incorporated, the company must have its object clause reflect financial activities (e.g., lending, investment) in its Memorandum of Association (MoA).

Step 2: Ensure Capital Requirements

Infuse the required minimum Net Owned Fund of ₹10 crore into the company. This should be reflected in the latest audited balance sheet, and funds should be deposited in a bank account in the name of the company.

Step 3: Compile Required Documents

Gather all documentation needed for NBFC registration. Key documents include:

• Certificate of Incorporation and MoA/AoA

• Board resolution approving NBFC application

• KYC and financial details of directors and shareholders

• Audited financial statements

• Banker’s report confirming NOF

• Business plan and financial projections (for at least 3 years)

• Organization structure and IT systems (for fintech models)

• Proof of registered office

Step 4: Apply for NBFC Registration Online

The application for NBFC registration must be submitted through the RBI’s COSMOS portal. Here’s how to proceed:

• Visit https://cosmos.rbi.org.in

• Create a login ID and complete the NBFC application form

• Upload scanned copies of all required documents

• Submit the form and receive a Company Application Reference Number (CARN)

Note: While this part of the NBFC registration online is digital, you must also submit physical copies of the application and documents to the RBI’s regional office for verification.

Step 5: Await RBI Approval

The RBI will review your application and may request additional information or clarifications. If all requirements are met and documents are in order, the RBI will issue a Certificate of Registration (CoR) allowing the company to operate as an NBFC.

This process may take several months, depending on the complexity of the application and the responsiveness of the applicant.

Also Read: How Much Time It Takes to Get an AIF License?

Additional Considerations for Fintech Startups

1. Technology & Compliance Readiness

Since your startup is tech-driven, it must demonstrate secure digital infrastructure, a well-defined customer onboarding process, and compliance with data protection laws (e.g., IT Act, GDPR if applicable).

2. RBI Classification

After registration, your NBFC will fall into a specific category based on its activities:

• NBFC-Investment and Credit Company (NBFC-ICC)

• NBFC-Micro Finance Institution (NBFC-MFI)

• NBFC-Factor

• NBFC-Account Aggregator

Choose the category that aligns best with your fintech business model.

3. Post-Registration Compliance

After obtaining NBFC status, your company must comply with ongoing regulatory obligations such as:

• Filing periodic returns to the RBI

• Adhering to fair practices codes

• Conducting internal and statutory audits

• Maintaining capital adequacy and provisioning norms

Frequently Asked Questions

1. Can a fintech startup apply for NBFC registration online?
Yes, fintech startups can apply for NBFC registration online through the RBI’s COSMOS portal. However, submission of physical documents is also required.

2. What is the minimum capital required for NBFC registration?
As per the latest RBI guidelines, a minimum Net Owned Fund of ₹10 crore is required for NBFC registration in India.

3. How long does the NBFC registration process take?
The process may take 3 to 6 months, depending on the completeness of the application and RBI’s review. Delays are possible if clarifications or additional documents are requested.

4. Can an existing fintech pivot to become an NBFC without restructuring?
The fintech must be a company under the Companies Act and meet all RBI criteria, including NOF, governance, and compliance systems. If these are not met, restructuring may be necessary.

Final Thoughts

The fintech space is rapidly evolving, and regulatory clarity is essential for sustainable growth. Converting your fintech startup into an NBFC is a significant step that brings both opportunities and responsibilities. It offers greater market access, trust, and regulatory legitimacy — all critical for scaling in the competitive financial services industry.