NBFC licence for fintechs: why lending startups want one and what RBI asks

NBFC stands for non-banking financial company. It is a company that lends or invests but is not a bank. It cannot take ordinary savings or current account deposits the way a bank does, and it does not run the payment system.

The RBI registers and supervises NBFCs under the Reserve Bank of India Act, 1934. Many familiar lenders for consumer loans, vehicle loans, gold loans and small business loans are NBFCs.

An NBFC can raise money by borrowing from banks, issuing bonds or taking equity, and it then lends that money at a higher rate. Its profit is the gap between what it pays for funds and what it earns from borrowers, less the cost of bad loans and running the business.

A fintech that only shows loan offers from banks earns a fee for each lead. A fintech with its own licence can lend, earn the interest and keep more of the economics.

A licence also brings credibility with customers, partners and investors, and it gives the company control over pricing and product design. The price is heavier rules, more capital and regular inspection.

There is also a risk side. Relying on a partner bank leaves the fintech exposed if the bank changes its mind, ends the deal or faces regulatory action. Owning a licence removes that single point of failure, though it adds others.

The RBI's requirements are detailed and have been revised, so read the current rules before relying on any figure here. As of November 2026, the main ideas are these.

• A minimum net owned fund: the company's own capital, after certain deductions. The RBI has been stepping this up for lending NBFCs, with a figure in the crore range, so check the current number.
• Fit and proper people: directors and promoters are checked for integrity, track record and financial standing.
• Proper structure: a board, policies on credit and risk, a compliance and audit setup, and a code for treating borrowers fairly.
• Ongoing rules: capital adequacy, provisioning for bad loans, reporting to the RBI, and limits on exposure.

Net owned fund is a measure of how much capital the owners have put in that is truly their own. It starts with paid-up capital and reserves and subtracts items like accumulated losses and certain investments.

A startup with ₹10 crore raised but ₹4 crore of losses would be counted well below ₹10 crore. This is why a fintech with an NBFC plan often raises equity first.

Applying involves an application to the RBI, documents on the promoters and the business plan, and often several rounds of questions. It can take many months. The timeline varies widely.

Because of this, some fintechs buy an existing NBFC that already holds a licence. Such a purchase also needs RBI approval for the change of control.

Founders should also plan for the cost of waiting. Staff, legal advice and a compliance team must be paid for before any loan is made, which is why a company usually raises equity before it applies.

The RBI's digital lending rules cover loans given through apps and online platforms. In broad terms they say the loan should be paid directly from the lender's account to the borrower's account, with no pass-through by a third party, and that borrowers must get a clear summary of the cost before accepting.

They also put the regulated lender in charge of its digital partners. The lender stays responsible for how a fintech partner collects data, advertises and handles complaints. The rules have been updated several times, so check the latest version.

A related point is data. Under these rules, a borrower's data may be collected only with a clear need and consent, and stored in line with RBI norms. A fintech working with a licensed lender should expect audits on how it treats such data.

Co-lending is an arrangement where a bank and an NBFC jointly fund a loan. The NBFC finds and services the borrower and shares part of the loan, while the bank provides most of the money at lower cost.

The RBI has set a framework for how the risk, interest and servicing are shared and how the loans are shown on each balance sheet. The details have changed in recent years, so confirm them against the latest directions.

For the borrower, co-lending often means a lower rate than the NBFC could offer alone, because the bank money is cheaper. For the NBFC, it means growth without raising as much of its own capital, though it still carries its share of any losses.

The RBI sorts NBFCs by what they do. A company that mainly lends is generally an investment and credit company. Others focus on infrastructure, microfinance, factoring, or housing, and housing finance companies sit under a separate regulator arrangement. A startup picks the category that matches the product it plans to sell.

The RBI also sorts NBFCs into layers by size and risk, with tougher rules for larger ones. A new fintech usually starts in the base layer. As it grows, it can face stricter requirements, such as more detailed governance and capital rules.

Which category applies changes what the company can do. For example, a company that wants to offer only small loans to businesses may choose a different category from one that wants to offer personal loans on an app. Confirm the classification with the latest RBI rules.

For a founder, the choice is between partnering with a licensed lender and getting licensed. Partnering is faster and needs less capital. Licensing gives control and margin but takes time, money and compliance effort.

Many fintechs use both routes. They start by partnering with banks to learn the business and prove their credit models, and later apply for their own licence once volumes justify the capital and the effort.

This guide is general information, not legal, tax or investment advice. Check with a qualified professional.