NBFC Consultant in Bangalore: CA Murli Chandak’s Guide to Net Owned Fund in a Venture Cap Table, Source-of-Funds Evidence and Valuing an NBFC Acquisition

In short: The NBFC question a Bangalore company brings me is rarely “how do we file”. It is usually one of three financial questions that sit underneath the filing: whether a venture-funded balance sheet, with its compulsorily convertible preference shares, securities premium and accumulated losses, actually adds up to the ₹10 crore Net Owned Fund that a new NBFC-ICC application needs; how to evidence the source of capital to RBI when that capital came from funds and foreign investors rather than from the founders’ own pockets; and whether it is faster to buy an existing NBFC than to register one, and if so, what that NBFC is actually worth. All three are accounting, certification and valuation questions rather than drafting questions, and since 28 November 2025 they are governed by two consolidated RBI Directions that most online guides still have not caught up with: the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025, which define what counts as Owned Fund, and the Reserve Bank of India (Non-Banking Financial Companies – Acquisition of Shareholding or Control) Directions, 2025, which govern every purchase of 26% or more of an NBFC. This guide works through each in turn, with the numbers a Chartered Accountant and Registered Valuer actually has to certify.

By CA Murli Chandak, FCA — Fellow Chartered Accountant and IBBI-Registered Valuer (Securities or Financial Assets), registration IBBI/RV/07/2021/14408, with 8+ years in valuation, audit and advisory practice. Regulatory citations verified against RBI’s own Directions, circulars and press releases as at September 2026.

Contents

1. 1. The Three Questions Bangalore Companies Actually Ask
2. 2. What Puts a Company Inside RBI’s Perimeter, in Brief
3. 3. Net Owned Fund When the Cap Table Is Venture-Funded
4. 4. Source-of-Funds Evidence When the Money Came From Funds, Not Founders
5. 5. Build or Buy: Acquiring an Existing NBFC Under the 2025 Directions
6. 6. Valuing the NBFC You Are Buying, or the Shares You Are Issuing
7. 7. The Bangalore Registration Route and RBI’s Bengaluru Regional Office
8. 8. After the CoR: Where Valuation Work Keeps Coming Back
9. 9. What I Do for a Bangalore NBFC Applicant or Acquirer
10. 10. Frequently Asked Questions
11. Discuss Your NBFC Plan

1. The Three Questions Bangalore Companies Actually Ask

A Bangalore company that approaches me about an NBFC has usually already answered the threshold question of whether it needs one. It is typically a venture-funded lending or embedded-finance business that has been originating loans for a partner NBFC or bank, has raised two or three rounds of institutional capital, and has decided that it wants its own Certificate of Registration so that the loan book, the margin and the customer relationship sit on its own balance sheet. What it has not yet worked out is the financial mechanics of getting there, and those mechanics are where the application is actually won or lost.

The first question is arithmetic: does the company, or the subsidiary it proposes to register, actually have ₹10 crore of Net Owned Fund as RBI computes it, once accumulated losses and capitalised technology are deducted and the preference shares are classified correctly? The second is evidential: RBI wants to know where the capital came from, and for a venture-funded company the honest answer runs through a Cayman or Mauritius fund, a domestic AIF, a couple of angels and a convertible note, each of which needs a different kind of document. The third is strategic: several Bangalore companies ask whether they should buy an already-registered NBFC instead, and that turns immediately into a valuation exercise and an RBI approval process of its own. Each of these is work a Chartered Accountant and Registered Valuer does, which is why this guide is organised around them rather than around the application form.

2. What Puts a Company Inside RBI’s Perimeter, in Brief

The legal test has not changed and I will not labour it. A company whose financial assets exceed 50% of its total assets, and whose income from those financial assets exceeds 50% of its gross income, is carrying on non-banking financial business as its principal business and needs a Certificate of Registration under Section 45-IA of the Reserve Bank of India Act, 1934 before it starts or continues that business. For a new NBFC-ICC, NBFC-Factor or NBFC-MFI applicant the minimum Net Owned Fund has been ₹10 crore since 1 October 2022; NBFC-P2P and Account Aggregator registrations sit at ₹2 crore. Carrying on the business without registration is an offence under Section 58B(4A) of the Act, punishable with one to five years’ imprisonment and a fine of ₹1 lakh to ₹5 lakh.

Two points matter more for a Bangalore company than the test itself. First, since 28 November 2025 the entire registration and scale-based framework has been consolidated into the RBI (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025, which superseded the October 2023 Master Direction and were themselves amended with effect from 1 July 2026 to create the “Type I” and “Type II” NBFC distinction: a company with no public funds, no customer interface and assets below ₹1,000 crore is now exempt from registration altogether, while any company that lends to customers registers as a Type II NBFC under the full framework. A Bangalore consumer or MSME lender is a Type II NBFC by definition, so the 2026 exemption is worth knowing about but will rarely apply to it. Second, the regulator is not a distant Mumbai office. RBI’s Bengaluru Regional Office has jurisdiction over Karnataka-registered companies, and the Certificate of Registration numbers it issues carry the “02” regional code, which is worth recognising when you are checking a target NBFC’s paperwork in Section 5.

3. Net Owned Fund When the Cap Table Is Venture-Funded

Most guides describe Net Owned Fund as “paid-up capital plus free reserves less losses” and stop there. That description is adequate for a promoter-funded company with ₹10 crore of ordinary equity sitting in a fixed deposit. It is not adequate for a Bangalore startup whose balance sheet has been built through priced rounds, because the components that dominate that balance sheet are exactly the ones the short description leaves out. The 2025 Directions define Owned Fund as the aggregate of paid-up equity capital, preference shares which are compulsorily convertible into equity, free reserves, the balance in the securities premium account and capital reserves representing surplus on sale of assets, reduced by the accumulated loss balance, the book value of intangible assets and deferred revenue expenditure. Net Owned Fund is that figure further reduced by the company’s investments in shares of subsidiaries, group companies and other NBFCs, and by loans and debentures of group companies, to the extent these together exceed 10% of Owned Fund.

Read against a typical Bangalore cap table, each element of that definition does something specific:

• Compulsorily convertible preference shares count; compulsorily convertible debentures do not. A Series A or B round structured as CCPS goes into Owned Fund at its paid-up value. The same money raised as CCDs is debt until conversion and adds nothing to the figure. If the plan is to register the operating company itself, the instrument the last round was papered on can be the difference between qualifying and not qualifying, and it is far cheaper to know that before the term sheet is signed than after.
• Securities premium counts in full. This is usually the largest number on a venture-funded balance sheet and it is often the reason the company qualifies at all, since paid-up equity in a startup is typically a few lakh rupees of founders’ shares at face value.
• Accumulated losses come off in full. A company that has raised ₹40 crore and spent ₹32 crore acquiring customers has, on this arithmetic, ₹8 crore of Owned Fund before any other deduction, whatever its last post-money valuation was.
• Capitalised technology comes off. A Bangalore lender that has capitalised its platform, app or credit engine as an intangible asset under Ind AS 38 sees that book value deducted. The same spend expensed through the P&L has already reduced free reserves once; capitalising it does not rescue the NOF, it just moves the deduction to a different line.
• Group investments above 10% of Owned Fund come off. If the entity applying is a holding company that also owns the technology subsidiary, the LSP entity or an overseas step-down, those investments are deducted beyond the 10% allowance. This is the single most common reason a group’s “we have more than ₹10 crore of net worth” turns into a Net Owned Fund below the floor.

A short illustration makes the point. Take a company with ₹1 crore of paid-up equity, ₹4 crore of CCPS, ₹25 crore of securities premium, ₹14 crore of accumulated losses and ₹3 crore of capitalised software, holding ₹4 crore of shares in a technology subsidiary. Owned Fund is ₹1 + ₹4 + ₹25 – ₹14 – ₹3, or ₹13 crore. Group investments of ₹4 crore exceed 10% of Owned Fund (₹1.3 crore) by ₹2.7 crore, so Net Owned Fund is ₹10.3 crore: it qualifies, but with almost no margin, and a single quarter’s further loss or one more round papered as CCDs would take it below the floor. The illustration is hypothetical, but the shape of it is what I see in Bangalore balance sheets repeatedly, and it is why the NOF computation belongs in the structuring conversation rather than in the last week before filing.

That arithmetic also decides the structure most Bangalore companies end up choosing. Where the operating company cannot clear the floor after deductions, or where the founders do not want the regulated activity mixed with the technology business, the usual answer is a new, clean subsidiary capitalised with ₹10 crore or more of fresh equity from the parent, with the money held as an unencumbered fixed deposit and certified by the statutory auditor as such. That certificate, reconciled to the bank’s lien confirmation, is the first document RBI’s Department of Regulation checks, and I have covered where it goes wrong in my Mumbai NBFC guide. The point specific to Bangalore is upstream of it: the parent must itself have the ₹10 crore to put in, from documented sources, which is the subject of the next section.

4. Source-of-Funds Evidence When the Money Came From Funds, Not Founders

RBI does not merely ask whether the Net Owned Fund exists; it asks where it came from, and it asks the same question of every proposed significant shareholder. For a promoter-run company the answer is a set of personal income-tax returns, bank statements and a net-worth certificate. For a venture-funded Bangalore company the answer is a chain, and every link in the chain has its own document:

• The corporate promoter. Where the applicant is a subsidiary, the parent company is the promoter, and RBI’s disclosure format for a corporate promoter asks for its major shareholders above 10%, its group companies and which of them are NBFCs, its regulators, its bankers and any regulatory or prosecution history. The parent’s own cap table therefore becomes part of the NBFC file, which surprises founders who assumed the subsidiary would be assessed on its own.
• Foreign investors. Foreign investment in NBFCs has been permitted up to 100% under the automatic route since October 2016, when the government and RBI opened “Other Financial Services” regulated by a financial sector regulator to automatic-route investment without the older minimum-capitalisation tiers. But the automatic route is a permission, not an exemption from paperwork. Each round in which a non-resident subscribed needed a pricing certificate under Rule 21 of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, showing the price was not below fair value under an internationally accepted pricing methodology certified by a Chartered Accountant, a SEBI-registered Merchant Banker or a practising Cost Accountant, and a Form FC-GPR filing within the prescribed period. RBI’s Department of Regulation can and does ask for this history, and an unfiled or late FC-GPR discovered during an NBFC application is a compounding matter that has to be regularised before the application can move.
• Investors from restricted jurisdictions. Two separate rules bite here. Under Press Note 3 of 2020, investment from an entity in, or beneficially owned from, a country sharing a land border with India needs prior Government approval regardless of sector. Separately, and specific to NBFCs, the 2025 Acquisition Directions provide that a new investor from or through a jurisdiction the FATF lists as high-risk or under increased monitoring cannot acquire significant influence, which RBI operationalises as less than 20% of voting power, computed both on existing voting rights and on existing plus potential voting rights assuming every CCPS and other convertible has converted. A Bangalore company with a convertible-heavy cap table needs to run that fully-diluted computation, not just the current shareholding, before it can represent to RBI that the rule is satisfied.
• Domestic AIF investors. A SEBI-registered Alternative Investment Fund whose sponsor or manager is not owned and controlled by resident Indian citizens is treated as a source of indirect foreign investment for the investee company under the NDI Rules, which brings its subscription within the same pricing and downstream-reporting regime as direct FDI. Several Bangalore funds fall on this side of the line, and the classification has to be established fund by fund.
• Convertible notes and angels. A convertible note issued by a DPIIT-recognised startup to a non-resident is a permitted instrument, but on conversion it becomes equity that must satisfy the same pricing floor, and until conversion it is not Owned Fund. Angel subscriptions need the same source-of-funds trail as any other individual shareholder, and a Bangalore cap table can carry twenty or thirty of them.

The practical consequence is that the source-of-funds file for a venture-funded applicant is assembled backwards through its funding history, and the time it takes depends on how well the earlier rounds were documented at the time. Where they were, the file comes together in weeks; where an FC-GPR was missed or a pricing certificate cannot be found, the regularisation runs on a separate clock that the NBFC application cannot outrun. This is the part of the engagement I ask to see first, before any business plan is drafted, because it is the part most likely to determine the timeline.

5. Build or Buy: Acquiring an Existing NBFC Under the 2025 Directions

The question of whether to buy an already-registered NBFC rather than apply for a fresh Certificate of Registration comes up in most Bangalore conversations, usually on the assumption that buying is faster. It can be, but it is not a way around RBI, and it has become more tightly defined since the RBI (Non-Banking Financial Companies – Acquisition of Shareholding or Control) Directions, 2025 took effect on 28 November 2025. The rules an acquirer has to plan around are these:

1. Prior written permission of RBI is required for any takeover or acquisition of control of an NBFC, whether or not management changes, and for any change in shareholding, including progressive increases over time, that results in acquisition or transfer of 26% or more of the NBFC’s paid-up equity capital. “Control” carries the meaning given in the SEBI Takeover Regulations, so board control or affirmative veto rights in a shareholders’ agreement can amount to control even below 26% of equity. The only carve-out is a shareholding that crosses 26% because of a court-approved buyback or capital reduction, which is reported within a month rather than pre-approved.
2. The application goes through PRAVAAH on the NBFC’s letterhead, with detailed information on each proposed shareholder and director, the source of the funds being used to buy the shares, declarations that the acquirers are not associated with any unincorporated deposit-taking body or with any company whose CoR application RBI has rejected, declarations of no criminal case including under Section 138 of the Negotiable Instruments Act, and a bankers’ report on the proposed shareholders. For a venture-funded acquirer the source-of-funds and shareholder-disclosure elements are the same chain described in Section 4, now applied to the buyer.
3. A public notice must follow RBI’s permission, not precede it. Once permission is granted, and at least 30 days before the transfer of ownership or control takes effect, a notice must appear in at least one leading national newspaper and one leading local vernacular newspaper covering the place of the NBFC’s registered office, which for a Bangalore target means a Kannada daily, stating the intention to transfer, the particulars of the transferee and the reasons. The notice is given by the NBFC and the transferee, or jointly. A closing timetable that does not leave room for the approval period followed by the 30-day notice period is a timetable that will slip.
4. Dormant targets are a trap, not a shortcut. RBI’s standing position, set out in a 2012 circular and enforced since, is that an NBFC must commence NBFC business within six months of receiving its CoR, failing which the CoR stands withdrawn automatically, and that there can be no change in ownership of an NBFC before it has commenced business and regularised its registration. RBI’s cancellation press releases, running to dozens of companies a month through 2026, include exactly this kind of entity. A “clean shell NBFC with a licence” that has never lent is, on this rule, frequently not a licence at all, and the first thing I check on any target is whether it has an operating loan book and a filed returns history behind its CoR.

Beyond those rules, due diligence on an NBFC target in Bangalore has a regulatory layer that ordinary company due diligence does not. The CoR itself is verified against RBI’s published list, and its number is read: a Bengaluru-issued certificate carries the “02” regional code, and the date and category on it are checked against the business the target actually runs. The target’s regulatory correspondence, inspection reports, returns-filing record and any RBI penalty or supervisory action are reviewed in full, because they transfer with the company. And since the 2026 Amendment Directions, the target’s registration type matters: a company holding a CoR as a Type I NBFC holds it on the premise that it has no customer interface, so a buyer planning consumer or MSME lending is changing the basis of the registration and should raise that squarely in the approval application rather than discover it afterwards.

6. Valuing the NBFC You Are Buying, or the Shares You Are Issuing

Every route into an NBFC involves at least one valuation that has to be certified, and often three at once, because three different regimes attach to the same share transaction and each has its own method and its own certifier. This is the part of an NBFC engagement that draws most directly on Registered Valuer work, and it is the part most often left until the deal is otherwise agreed.

• Income-tax. The Income-tax Act, 2025, in force from 1 April 2026, carries forward the anti-abuse rules on transfers of unquoted shares: Section 92(2)(m) taxes a buyer who pays less than the fair market value of unquoted equity, and Section 79 deems the seller’s consideration to be at least that value, with fair market value for these purposes computed under Rule 57 of the Income-tax Rules, 2026 on a Net Asset Value basis. These are the successors to Sections 56(2)(x) and 50CA of the 1961 Act and Rule 11UA, and the working is the same in substance: the target’s audited balance sheet, adjusted as the rule prescribes, produces a floor price per share. For an NBFC, that NAV floor sits close to the Net Owned Fund figure from Section 3, which is why the two workings are usually prepared together.
• FEMA. Where a non-resident is on either side of the transaction, Rule 21 of the NDI Rules requires the price to be at or above fair value under an internationally accepted pricing methodology when a resident sells or the company issues to a non-resident, and at or below it when a non-resident sells to a resident, with the valuation certified by a Chartered Accountant, a SEBI-registered Merchant Banker or a practising Cost Accountant. An acquisition of a Bangalore NBFC by a company that is itself majority foreign-owned brings the downstream-investment rules into the same certificate.
• Companies Act. A preferential allotment of the NBFC’s shares to the acquirer, or a share swap, needs a valuation report from a Registered Valuer under Section 247 of the Companies Act, 2013 read with Section 62(1)(c) and the Share Capital and Debentures Rules. This is the report I sign as an IBBI-Registered Valuer for Securities or Financial Assets, and it must reconcile with the tax and FEMA figures rather than contradict them.

The certifications answer the question of what the law requires the price to be. The commercial question, what the NBFC is actually worth, is answered differently, and a Registered Valuer has to be able to defend the bridge between the two. An operating NBFC is conventionally valued on a multiple of book value rather than on earnings, with Net Owned Fund as the base and the multiple driven by the quality and yield of the loan book, the cost of funds, the growth the balance sheet can support at a 15% Capital to Risk-Weighted Assets Ratio, and the state of the regulatory relationship. Loan-book quality is tested against RBI’s asset-classification and provisioning norms and, for an Ind AS reporter, its expected-credit-loss model, and I re-perform enough of it to know whether the reported book value holds. The premium a buyer pays above book for the Certificate of Registration itself, which is what a Bangalore company buying a small NBFC is largely paying for, has to be tested against the cost and time of a fresh registration and discounted for the risk that RBI’s approval under the Acquisition Directions is delayed or refused, which is why the share purchase agreement should make that approval a condition precedent rather than a closing formality.

Regulatory history is a valuation input, not a footnote, and Bangalore has a recent and public illustration. On 17 October 2024 RBI, acting under Section 45L(1)(b) of the RBI Act, directed four NBFCs to cease sanctioning and disbursing loans from 21 October 2024 on material supervisory concerns about loan pricing, and one of the four was Navi Finserv Limited, Bengaluru, an NBFC-ICC holding CoR N-02.00270 dated 18 May 2022. RBI lifted the restrictions on 2 December 2024, recording that the company had revamped its processes and committed to fairness in loan pricing. The point for an acquirer or investor is not about that company, which resolved the matter in six weeks; it is that a supervisory action of that kind sits in the target’s file, changes the earnings a valuer can rely on for the affected period, and has to be priced.

7. The Bangalore Registration Route and RBI’s Bengaluru Regional Office

For a company that decides to register rather than buy, the mechanics are national and I will keep them short. Every application for a Certificate of Registration has been filed through RBI’s PRAVAAH portal since it became mandatory on 1 May 2025, and the application generates a reference number against which the physical set, paginated and with the PRAVAAH acknowledgement, is submitted to the Regional Office of RBI’s Department of Regulation with jurisdiction over the company’s registered office. For a Karnataka-registered company that is RBI’s Bengaluru Regional Office, and the queries that follow come from there. The application itself comprises the company’s constitutional documents, the statutory auditor’s Net Owned Fund certificate reconciled to the bank’s lien confirmation, the source-of-funds file described in Section 4, the “fit and proper” documentation and disclosures for every director and significant shareholder, and a five-year business plan with projections built from the company’s own unit economics rather than from a template.

Timelines are not fixed by statute, and I do not quote a promised date. In my experience a complete, well-evidenced NBFC-ICC application without foreign-investment complications can clear in a few months, while an application whose source-of-funds chain needs regularisation, or whose digital-lending and default-loss-guarantee arrangements draw repeated clarification rounds, can run considerably longer. The variable that a Bangalore applicant controls is how complete the financial file is on the day of filing, which is why the sequence in this guide runs Net Owned Fund first, source of funds second, and the filing last.

8. After the CoR: Where Valuation Work Keeps Coming Back

Registration does not end the valuation work; it institutionalises it. Three things a venture-funded Bangalore NBFC does routinely each carry a certified valuation and, in some cases, a fresh RBI approval:

• Every subsequent priced round. A Series B or C into the NBFC needs a Registered Valuer report under Section 62(1)(c) for the preferential allotment and a Rule 21 pricing certificate for any non-resident subscriber. More importantly, the 26% threshold in the Acquisition Directions is computed on progressive increases over time, so a lead investor that builds from 12% to 18% to 27% across three rounds needs RBI’s prior permission for the round that crosses the line, and a term sheet that ignores this has a closing condition it does not know about.
• ESOP grants and buybacks. An NBFC that grants options needs a fair-value determination for the accounting charge and, for the tax perquisite on exercise, a Merchant Banker’s or Registered Valuer’s certificate as the rules require. I cover the scheme mechanics in my ESOP guide for Bengaluru companies; the addition for an NBFC is that a buyback of vested shares can itself move a shareholding across 26%, which is the one route the Acquisition Directions treat by post-facto reporting rather than prior approval, but only where a competent court has approved it.
• Capital adequacy and the layer the company sits in. The Net Owned Fund computation from Section 3 is repeated at every audited balance sheet, alongside the 15% CRAR, and both feed into the Scale Based Regulation layer the company occupies. An NBFC that crosses ₹1,000 crore of assets moves from the Base Layer to the Middle Layer and picks up a materially heavier governance and disclosure load, which a fast-growing Bangalore lender should model into its projections rather than discover at the audit.

9. What I Do for a Bangalore NBFC Applicant or Acquirer

NBFC work in this practice is the financial, certification and valuation layer of the registration or acquisition, coordinated through to RBI’s decision:

• Net Owned Fund computation from the actual cap table, instrument by instrument, with a written view on whether the operating company or a new subsidiary should be the applicant, and the statutory auditor’s certificate and bank reconciliation that follow from that choice.
• The source-of-funds file for institutional and foreign capital, assembled backwards through the funding history, with identification and regularisation of any FEMA reporting gaps before the NBFC application is filed.
• FATF and Press Note 3 computations on a fully-diluted basis, so the representations made to RBI about restricted-jurisdiction investors are ones the cap table actually supports.
• Acquisition support under the 2025 Directions: regulatory due diligence on the target and its CoR, the PRAVAAH approval application and disclosures, the public-notice sequencing, and the condition-precedent structure in the share purchase agreement.
• Valuation reports for the transaction, whether Rule 57 fair market value, Rule 21 fair value, or a Registered Valuer report under Section 247, reconciled with each other and with the commercial price, drawing on the same Registered Valuer work already in place for Bangalore clients.
• The five-year business plan and projections built from the company’s own unit economics, and the responses to RBI’s clarification rounds through to the Certificate of Registration or the acquisition approval.
• Post-registration continuity: the annual NOF and CRAR workings, valuation certificates for subsequent rounds and ESOPs, and the 26% monitoring on every new investment.

10. Frequently Asked Questions

Q1. Do compulsorily convertible preference shares count towards Net Owned Fund?

A: Yes. RBI’s 2025 Directions include preference shares that are compulsorily convertible into equity in Owned Fund, alongside paid-up equity, free reserves and securities premium. Compulsorily convertible debentures do not count until they convert, which is why the instrument a round is papered on matters to an NBFC plan.

Q2. Our last post-money valuation was well above ₹10 crore. Does that mean we have the Net Owned Fund?

A: No. Net Owned Fund is a book-value computation, not a market-value one. It starts from paid-up capital, CCPS, securities premium and free reserves, and deducts accumulated losses, intangible assets, deferred revenue expenditure and group investments above 10% of Owned Fund. A company with a large valuation and large accumulated losses can fail the floor comfortably.

Q3. Does capitalising our lending platform as software help the NOF?

A: No. The book value of intangible assets is deducted from Owned Fund, so capitalised software reduces the figure by exactly its carrying amount. Expensing the same spend would have reduced free reserves instead; the NOF outcome is the same either way.

Q4. Our capital came through a Mauritius fund. Is that a problem for RBI registration?

A: Not in itself: foreign investment in RBI-regulated financial services has been permitted up to 100% under the automatic route since 2016. What RBI checks is the record: the Rule 21 pricing certificate and FC-GPR filing for each round, the fund’s own ownership and regulatory status as a corporate shareholder, and whether any part of the chain runs through a FATF-listed or land-border jurisdiction.

Q5. Is it faster to buy an existing NBFC than to register a new one?

A: Sometimes, but not by the margin people assume. Acquiring control or 26% or more of an NBFC needs RBI’s prior written permission under the 2025 Acquisition Directions, followed by a 30-day public notice before the transfer takes effect, and the buyer’s source-of-funds and shareholder disclosures are as detailed as in a fresh application. The time saved is the RBI assessment of the business plan for a company that is already operating; the time is not saved on RBI’s assessment of the buyer.

Q6. What is wrong with buying a dormant NBFC that has never lent?

A: RBI’s standing position is that an NBFC must commence business within six months of its CoR or the CoR stands withdrawn automatically, and that ownership cannot change before business has commenced and the registration regularised. A shell that has held its capital in fixed deposits for years is likely to fail this test, and RBI’s monthly cancellation batches include many such companies. Verify the loan book and returns history before valuing the licence.

Q7. Which valuation applies when we buy the shares of an NBFC?

A: Usually three. Rule 57 of the Income-tax Rules, 2026 fixes a Net Asset Value floor for tax purposes under Sections 92(2)(m) and 79 of the Income-tax Act, 2025; Rule 21 of the NDI Rules fixes a fair-value floor or ceiling where a non-resident is involved; and a Registered Valuer report under Section 247 of the Companies Act is needed for a preferential allotment or share swap. The three must reconcile with each other and with the commercial price.

Q8. How is an NBFC actually valued commercially?

A: Typically on a multiple of book value with Net Owned Fund as the base, driven by loan-book quality tested against RBI’s provisioning norms or an Ind AS expected-credit-loss model, cost of funds, and the growth the balance sheet can carry at a 15% CRAR. Any premium paid for the Certificate of Registration itself is tested against the cost of a fresh registration and discounted for the risk that RBI’s approval of the acquisition is delayed or refused.

Q9. Our lead investor will cross 26% at the next round. Does that need RBI approval?

A: Yes. The 26% threshold in the Acquisition Directions applies to progressive increases over time, so the round in which an investor’s aggregate holding reaches 26% or more of paid-up equity needs RBI’s prior written permission, applied for through PRAVAAH before the allotment, not after.

Q10. Does the 2026 “Type I NBFC” exemption apply to a Bangalore lending startup?

A: Almost never. The exemption from registration introduced with effect from 1 July 2026 is for companies with no public funds, no customer interface and assets below ₹1,000 crore, which describes a group treasury or investment vehicle, not a lender. A company that lends to customers is a Type II NBFC and registers under the full framework.

Q11. What does the “02” in an NBFC’s CoR number mean?

A: It is the regional code of RBI’s Bengaluru Regional Office, which issues and administers the certificates of Karnataka-registered NBFCs. Reading the CoR number, category and date against the target’s actual business is one of the first steps in due diligence on an NBFC acquisition.

Q12. Can you take on only the valuation or only the NOF computation, if another firm is handling the filing?

A: Yes. The Net Owned Fund computation, the source-of-funds file, the Registered Valuer report and the Rule 57 and Rule 21 certificates are each discrete pieces of work that can be taken on independently of who manages the PRAVAAH filing, and they are the pieces that most often need a Chartered Accountant and Registered Valuer rather than a filing agent.

Discuss Your NBFC Plan

If your Bangalore company is working out whether its cap table clears the Net Owned Fund floor, assembling a source-of-funds file for institutional capital, or weighing the purchase of an existing NBFC, tell me where things stand and I can map out the computations and approvals still needed.

CA Murli Chandak – FCA | IBBI-Registered Valuer (Securities or Financial Assets) | IBBI/RV/07/2021/14408
Website: murlichandak.com
Phone: +91 99985 39902
Email: murlichandak@murlichandak.com
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This article is intended for general guidance only and does not constitute legal, financial or regulatory advice. Regulatory positions are stated as at September 2026 and were verified against the Reserve Bank of India Act, 1934; the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025 (RBI/DOR/2025-26/339, 28 November 2025) and their 2026 Amendment Directions (notified 29 April 2026, effective 1 July 2026); the Reserve Bank of India (Non-Banking Financial Companies – Acquisition of Shareholding or Control) Directions, 2025 (RBI/DOR/2025-26/340, 28 November 2025); RBI’s A.P. (DIR Series) Circular No. 8 of 20 October 2016 on foreign investment in Other Financial Services; Rule 21 of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019; the Income-tax Act, 2025 and Rule 57 of the Income-tax Rules, 2026; and RBI press releases of 17 October 2024 and 2 December 2024. The Net Owned Fund illustration in Section 3 is hypothetical. Thresholds, procedures and timelines under the RBI framework are revised from time to time and should be confirmed against RBI’s current Directions on the date of filing.

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