India is an emerging market that provides ideal conditions for entrepreneurship and investments. Its diversified financial sector continues to grow at a fast pace, which opens up a world of opportunities and exciting careers. This industry is increasing by nearly 8.5 percent per year, indicating a strong economy. Now is a perfect time to launch your own finance company and penetrate this growing market. Indian finance companies allow for greater innovation and diversification compared to the banking system, so use this to your advantage. All you need is a strong business plan and a smart marketing strategy.
Research the Industry
Before getting started, make sure you have a good understanding of the country's financial sector. Indian finance companies operate differently than traditional banks and have specific requirements. They can be registered in various forms, such as:
- Microfinance companies
- Nidhi companies
- Trusts and societies
- Non-banking finance companies (NBFC)
Each option has its pros and cons. Non-banking finance companies, for instance, are governed by the Reserve Bank of India. This is where you can obtain a license. Depending on your goals, you can incorporate a loan company, one engaged in the securities industry or one that specializes in asset-backed financing.
NBFCs are registered as public liability companies under the Indian Companies Act of 1956 and require a minimum capital of Rs two crores. If you start a microfinance company, your minimum capital must be higher than Rs five crores.
Once you obtain a license, you will be able to provide loans and cash advances, receive deposits, sell insurance policies and acquire stocks or shares. You may not accept and demand deposits as traditional banks do. Additionally, you can only accept foreign payments up to a certain limit. The advantage is that you are allowed to work anywhere in India and provide a wide variety of financial products.
Other business registration options include Trusts and societies, Nidhi companies and producer companies. Compared to NBFCs, these businesses are more specific. Producer companies, for example, appeal to farmers. Trusts and societies are allowed to provide finance only to members. An NBFCs offers greater flexibility.
Apply for an Indian Company Registration
After you choose a business model, apply for finance company registration. Head over to a local branch of the Reserve Bank of India or visit its official website. Download the NBFC application form and enter the required information. Next, upload the form so you can receive a reference number.
Go to a regional office of the bank with your reference number and registration form. If you meet the requirements outlined in Section 45-IA of the Reserve Bank of India Act of 1934, the bank will issue a Certificate of Registration within five-to-six months.
Be aware that not all types of financial companies require NBFC license. These include, but are not limited to, venture capital companies, stock brokering companies, insurance agencies and housing finance businesses. Companies specialized in stock brokering, for instance, are regulated by the Securities and Exchange Board of India, so they require a different kind of license.
Also, determine what type of NBFC license suits your needs. This will depend on the nature of your business. You can start an asset finance company, a loan company, a micro-finance institution and more.
No matter what you choose, registering finance companies in India isn't going to be easy. Be prepared to file out extensive paperwork and wait for a decision. In the meantime, create a business plan.
Assess the Business Requirements
Depending on the size of your business, analyze the costs involved. Consider the salaries and wages, utilities, office space and marketing activities. Are you going to operate online as well? In this case, a website will be necessary. Plus, you will need to invest in advertising, web design and digital marketing.
Determine how many employees are required. Also, decide whether you're going to run the business alone or with a financial partner. For example, if you have a lending business, you could hire a mortgage broker. He will act as an intermediary between your company and borrowers in exchange for a commission.
Develop a Business Plan
Once you obtain the license and crunch the numbers, come up with a plan. Think of it as a blueprint for growing your company in the future. Write down your short-and-long-term goals, mission, strategies and product offerings. Consider the market and potential competitors.
Make sure your business plan clearly describes your company’s management. Indian finance companies require a chief financial officer, a chief administrative officer, a chief operating officer and other executives. Their role is to manage each department of the organization, track its performance and ensure everything goes smoothly. In smaller companies, one person can fill multiple roles.
Next, plan your marketing strategies. Decide how you are going to reach potential clients and investors. Set a budget for online and offline advertising campaigns, business cards, PR and other related activities. These aspects can be managed by an in-house team or outsourced to a marketing agency.
Take the time to grow your network and get involved in the local community. The more people who know about your business, the higher your chances of success. Attend local events, send out press releases and connect with other companies in your city.
- NBFCs cannot offer interest rates higher than the ceiling rate prescribed by the Reserve Bank of India from time to time. The interest may be paid or compounded at minimum monthly intervals.
- With the exception of certain asset finance companies, NBFCs should maintain investment-grade credit ratings.
- NBFC deposits are not insured. They are also not guaranteed by the Reserve Bank of India.
Andra Picincu is a digital marketing consultant with over 10 years of experience. She works closely with small businesses and large organizations alike to help them grow and increase brand awareness. She holds a BA in Marketing and International Business and a BA in Psychology. Over the past decade, she has turned her passion for marketing and writing into a successful business with an international audience. Current and former clients include The HOTH, Bisnode Sverige, Nutracelle, CLICK - The Coffee Lover's Protein Drink, InstaCuppa, Marketgoo, GoHarvey, Internet Brands, and more. In her daily life, Ms. Picincu provides digital marketing consulting and copywriting services. Her goal is to help businesses understand and reach their target audience in new, creative ways.