Compliance in an NBFC: Comprehensive Checklist

NBFCs in India are regulated by the Reserve Bank of India (RBI). For the purpose of regulating the same, RBI has prescribed certain compliances to be taken care of. Here in this article, we will discuss about the applicable compliance as well as some of the best practices for the compliances that are applicable to NBFCs in India:

  • Capital adequacy: NBFCs are required to maintain a minimum capital adequacy ratio of 15%. This means that for every ₹100 of assets, NBFCs must have at least ₹15 in capital.
  • Leverage ratio: NBFCs are also required to maintain a maximum leverage ratio of 7. This means that for every ₹1 of equity, NBFCs can borrow up to ₹7.
  • Asset classification: NBFCs are required to classify their assets into four categories: standard, substandard, doubtful, and loss. Assets that are performing well are classified as standard, while assets that are not performing well are classified as substandard, doubtful, or loss.
  • Provisioning: NBFCs are required to make provisions for their non-performing assets. The amount of provisioning required depends on the asset classification. For example, NBFCs are required to make a 100% provision for assets that are classified as loss.
  • Reserves: NBFCs are required to maintain certain minimum reserves. These reserves are used to absorb losses and to ensure the stability of the NBFC.
  • Audit: NBFCs are required to have their financial statements audited by a qualified auditor. The auditor's report is submitted annually to the Reserve Bank of India (RBI).
  • Reporting: NBFCs are required to submit certain reports to the RBI on a regular basis. These reports include information on the NBFC's financial performance, asset quality, and capital adequacy, these are as mentioned below:
  • Filings of returns with RBI at XBRL portal:
  • DNBS 02: filed quarterly
  • DNBS 10: filed annually last date 31st December:
  • DNBS 13: filed quarterly.

  • Filings of returns with RBI at CIMS portal:
  • DNBS 02: filed quarterly
  • DNBS 10: filed annually last date 31st December:
  • DNBS 13: filed quarterly: 

  • Submission of certain board resolutions: annually:
  • Event based
  • filing of returns with FIU: monthly:
  • filing of returns with CKYC: monthly: 
  • Filing of returns with CERSAI: monthly, 

NBFCs that fail to comply with the applicable laws and regulations may be subject to penalties, such as fines, suspension of operations, or even cancellation of the licence. It is therefore important for NBFCs to have a strong compliance program in place. This program should be designed to ensure that the NBFC complies with all applicable laws and regulations.

Here are some of the best practices for NBFCs to follow in order to ensure compliance:

  • Have a written compliance policy: The compliance policy should be a comprehensive document that outlines the NBFC's commitment to compliance and the procedures that the NBFC will follow to ensure compliance.
  • Appoint a Chief Compliance Officer (CCO): The CCO should be a senior-level executive who is responsible for developing and implementing the NBFC's compliance program.
  • Create a compliance committee: The compliance committee should be a group of senior executives who are responsible for overseeing the NBFC's compliance program.
  • Provide training to employees: All employees should be trained on the NBFC's compliance policies and procedures.
  • Implement a risk-based approach to compliance: The NBFC should identify and assess the risks to its compliance with the applicable laws and regulations. The NBFC should then develop and implement procedures to mitigate these risks.
  • Monitor compliance: The NBFC should monitor its compliance with the applicable laws and regulations on an ongoing basis.
  • Report on compliance: The NBFC should report on its compliance with the applicable laws and regulations to the board of directors on a regular basis.
  • Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT): NBFCs are required to comply with AML and CFT regulations. These regulations are designed to prevent criminals from using financial institutions to launder money or finance terrorism.
  • Know Your Customer (KYC): KYC procedures are designed to verify the identity and financial status of customers. NBFCs are required to implement KYC procedures by collecting information such as customer name, address, date of birth, and identification number.
  • Customer Due Diligence (CDD): CDD procedures are designed to assess the risks associated with customers. NBFCs are required to implement CDD procedures by collecting information such as customer income, employment history, and financial assets.
  • Credit Risk Management: Credit risk management is the process of identifying, assessing, and managing the risks associated with lending to customers. NBFCs are required to have a sound credit risk management system in place. This system should include policies and procedures for assessing the creditworthiness of customers, setting lending limits, and monitoring customer loans.
  • Operational Risk Management: Operational risk is the risk of loss arising from inadequate or failed internal processes, people, and systems or from external events. NBFCs are required to have a sound operational risk management system in place. This system should include policies and procedures for identifying, assessing, and managing operational risk.
  • Information Security: NBFCs are required to have a sound information security system in place. This system should be designed to protect the NBFC's data and systems from unauthorized access, use, disclosure, disruption, modification, or destruction.
  • Fair Practices Code: The Fair Practices Code is a set of guidelines for NBFCs to follow in their dealings with customers. The Code covers areas such as transparency, fairness, and customer service.

It is therefore important for NBFCs to be aware of these compliances and to take steps to ensure that they are in compliance.

Here are some of the challenges that NBFCs face in complying with these regulations:

  • Complexity: The regulations are complex and can be difficult to understand and implement.
  • Cost: The cost of compliance can be significant, especially for smaller NBFCs.
  • Lack of resources: NBFCs may not have the resources to implement and maintain a comprehensive compliance program.
  • Changing regulations: The regulations are constantly changing, which can make it difficult for NBFCs to stay compliant.

Despite these challenges, it is important for NBFCs to comply with the applicable regulations. By doing so, NBFCs can help to protect themselves, their customers, and their stakeholders.

We can also help you and your business to sustain and grow by

Advising for the right approach for the business, not just compliance but also the current market trends that will drive growth to the forefront.


This blog is authored by Company Secretary Ronak Gupta. He is author of many blogs and runs many websites and youtube channels. His work is dedicated to corporate laws, legal, secretarial, professional services and also in strategy formulations for corporates. Mail him at: csronakgupta23@gmail.com or call at :9910226715

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