🕵️♂️ NBFC Due Diligence Services Ensuring Compliance & Building Trust in the Financial Ecosystem
In the dynamic landscape of financial services, Non-Banking Financial Companies (NBFCs) play a pivotal role in driving economic growth. However, with increasing regulatory scrutiny, ensuring compliance and operational integrity has become paramount. At Marcken Consulting, we offer comprehensive NBFC Due Diligence services to help you navigate the complexities of regulatory requirements and build trust with stakeholders.
📌 What is NBFC Due Diligence?
NBFC Due Diligence is a thorough approach to evaluating an NBFC’s operational, financial, legal, and compliance requirements. This assessment is important for:
✅ Investors: Assessing the viability and risks associated with investing in an NBFC.
✅ Acquirers: Making informed decisions during mergers and acquisitions.
✅ Regulators: Ensuring adherence to statutory requirements.
✅ Internal Management: Identifying areas of improvement and mitigating potential risks.
🔍 Why is due diligence so important to NBFCs?
The Reserve Bank of India (RBI) has intensified its oversight of NBFCs, leading to several supervisory actions against entities failing to comply with regulatory norms. For instance:
🔹Edelweiss Group Companies
Faced restrictions for ‘evergreening’ distressed assets.
🔹 IIFL Finance
Barred from offering gold loans due to collateral assessment issues.
🔹 JM Financial
Because of governance difficulties, loans backed by shares and debentures are not permissible.
These instances underscore the importance of thorough due diligence to ensure compliance and avoid punitive actions.
🛠️ Our Comprehensive NBFC Due Diligence Services
At Marcken Consulting, we adopt a holistic approach to NBFC Due Diligence, encompassing the following key areas:
We evaluate the NBFC’s compliance with the following legal and regulatory frameworks:
- Verification of incorporation documents (COI, MOA, AOA).
- Examination of statutory compliance (RBI, SEBI, MCA filings).
- Review of contracts, agreements, and legal obligations.
- Assessment of pending litigations and legal disputes.
Our financial experts analyze:
- Audited financial statements and reports.
- Asset and liability valuations.
- Revenue streams and profitability metrics.
- Tax compliance and liabilities.
We evaluate the operational efficiency by:
- Reviewing organizational structure and HR policies.
- Assessing IT systems and data management practices.
- Evaluating customer service protocols and satisfaction levels.
Our team examines:
- Market positioning and competitive analysis.
- Business model viability and scalability.
- Sales and marketing strategies.
- Customer base and retention rates.
We ensure the NBFC’s compliance with:
- RBI’s regulatory requirements.
- FIU-IND registration and reporting.
- Membership with Credit Information Companies (CICs).
📋 Key Components of NBFC Due Diligence
🏛️ Statutory Reserve Creation
As per Section 45-IC of the RBI Act, NBFCs must transfer at least 20% of their net profits to a reserve fund annually before declaring dividends.
🧾 KYC Compliance
NBFCs are required to register with the Central KYC Registry and ensure periodic updates based on risk categorization with the RBI KYC Guidelines.
🕵️ FIU-IND Registration
Under the Prevention of Money Laundering Act, NBFCs must register with the Financial Intelligence Unit-India and report specified transactions.
⚖️ Legal Representation
NBFCs empowered under the SARFAESI Act must appoint nominated counsels in the Delhi High Court and notify the Central Registry.
📈 CIC Membership
To facilitate the sharing of credit data, NBFCs must join at least one Credit Information Company.
🎯 Want this done without the stress?
🚀 Why Choose Marcken Consulting?
- Expertise: Experienced individuals with extensive knowledge of NBFC operations and regulations make up our team.
- Customized Solutions: We customize our due diligence services to fit your unique goals and requirements.
- Confidentiality: We adhere to the strictest guidelines for confidentiality and data security.
- End-to-End Support: From initial assessment to final reporting, we provide comprehensive support throughout the due diligence process.
Frequently Asked Questions
What is the normal timeframe for the NBFC due diligence process?
The duration of an NBFC due diligence exercise depends on several factors, including the size of the company, the complexity of its operations, and the availability of documentation. Typically, the process takes anywhere between 2 to 6 weeks. For smaller NBFCs with well-maintained records, the process can be completed quickly. However, for larger organizations or those undergoing a merger or acquisition, a deeper analysis may be required, which could extend the timeline. At Marcken Consulting, we ensure that even while being thorough, the process is completed as efficiently and smoothly as possible, without disrupting your day-to-day operations.
Is due diligence mandatory for all NBFCs?
Due diligence is not legally mandatory in all cases, but it is strongly recommended, especially during major business events like mergers, acquisitions, or large-scale investments. It acts as a safeguard against regulatory non-compliance, operational inefficiencies, and financial discrepancies. Regulators such as the RBI place significant emphasis on corporate governance and regulatory adherence, and a proactive due diligence review can help you identify issues before they become serious problems. Whether you’re a potential investor, acquirer, or a growing NBFC, conducting due diligence is a smart move to build credibility and future-proof your business.
Can Marcken Consulting assist with post-due diligence compliance?
Yes, absolutely! We don’t just hand over a report and disappear. At Marcken Consulting, we believe in supporting our clients beyond just the assessment phase. Once the due diligence is completed, we provide a comprehensive report detailing findings, risk areas, and actionable insights. Based on this, we offer personalized recommendations and can assist in implementing corrective measures, addressing compliance gaps, and preparing necessary documentation. We become your strategic compliance partner to help you maintain long-term operational health and regulatory standing.
How often should an NBFC undergo due diligence?
We recommend that NBFCs conduct due diligence periodically—preferably once a year—as part of a proactive risk management and governance framework. Regular due diligence allows you to keep track of compliance status, adapt to regulatory changes, and rectify operational inefficiencies on time. Moreover, if your NBFC is entering a new growth phase, considering funding, or restructuring, then conducting a fresh due diligence exercise becomes even more essential. Think of it like a yearly health check-up—better safe than sorry!
What documentation and information are usually requested during NBFC due diligence?
Great question! To conduct a thorough NBFC due diligence, our team generally requires access to a range of documents and data points. These include:
- Incorporation documents (Certificate of Incorporation, MOA, AOA)
- RBI registration and compliance filings
- Financial statements include audited reports, balance sheets, and income statements.
- Tax returns and GST filings
- Loan books and asset registers
- KYC and AML policy documents
- Legal contracts, partnership deeds, and vendor agreements
- Details of litigations or regulatory notices, if any
- Customer grievance redressal reports
- Details of board meetings, resolutions, and governance protocols.
👉 Talk to our NBFC Experts Now
