There are various types of financial companies that can be set up in India. Each of them is subject to different requirements when it comes to authorization, which is why if you want to register such a business, you need to file for a banking or financial license in India.
If you want to open such a business, our Indian company formation specialists can help you incorporate it and obtain the necessary financial licenses.
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How to register a financial company in India
If you want to register a company in India in the financial sector, you must first choose an appropriate legal entity. From this point of view, please note that such businesses can operate as small or large enterprises. As such, you can select between:
- a one-person company, which operates just like a corporate entity;
- a limited liability partnership, which is a partnership with a minimum number of 2 participants who own shares with limited liability;
- the private limited liability company, which is one of the best business forms for a medium-sized financial enterprise in India;
- the joint stock company, which is often used when creating a banking institution.
The one-person company is often employed to set up a fintech business. No matter the sector of this industry you decide to operate in, you need to obtain a specific financial license in India.
Types of financial companies and licenses in India
The business permit obtained to carry out a financial activity will also reflect the activities completed by the company. For instance:
- the banking license is available for banks and other similar institutions;
- the small finance bank license which is available for financial companies meant to service small companies and households in urban and rural areas;
- the fintech license which is available for fintech companies.
Local and foreign investors can also set up non-financial companies known as Non-Banking Finance Companies (NBFC).
Other types of financial companies found in India are:
- micro-finance companies under Section 8 in the Reserve of Bank of India Law;
- credit cooperatives that can be registered as trusts and societies;
- Nidhi companies can only accept deposits and grant various types of loans.
- local finance companies;
- producer companies.
No matter the type of Indian financial license required for any of these enterprises, it will be issued by the Reserve Bank of India.
If you are a foreign investor and want to set up a company in India in this sector, we advise using our business incorporation solutions to avoid misunderstandings.
Our team is also made up of accountants in India who can help you with the complex financial and accounting regulations applicable to this industry. They can help you with filing annual financial statements, as well as with payroll in India.
Requirements to obtain a financial license in India
Depending on the type of activity to be carried out, there are several conditions to meet during the licensing phase with respect to the following:
- number of shareholders (a Nidhi company needs at least 7 members, for example);
- management requirements (for the same Nidhi company, at least 3 directors must be appointed);
- share capital.
When it comes to the share capital requirements for opening a financial company in India, here they are:
- for NBFC companies at least INR 2 crore (approx. USD 24,000) is required;
- for micro-finance NBCF companies, the minimum capital required is INR 5 crores (approx. USD 60,000);
- INR 5 lakh (approx. USD 6,000) is the minimum capital for a Nidhi company, however, the amount must be increased to INR 10 lakh by the first year of activity.
If you want to open a financial company in India and need assistance, do not hesitate to contact our local specialists. They will help you prepare the necessary documents and obtain the desired Indian financial license.