NBFC - FIT AND PROPER


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	Blog Categories All Financial Market (2) Income Tax (2) TDS (1) NBFC - FIT AND PROPER Category: Financial Market, Posted on: 08/08/2025 , Posted By: RAJESH KOTHARI Visitor Count:17 Understanding the "Fit and Proper" Criteria for NBFC Acquisitions In the ever-evolving landscape of financial regulation, the Reserve Bank of India (RBI) plays a pivotal role in safeguarding the integrity of the financial system. One of its key mechanisms for ensuring sound governance in Non-Banking Financial Companies (NBFCs) is the “Fit and Proper” criteria. This declaration is a mandatory part of the approval process when there's a proposed change in management or shareholding in an NBFC. Let’s break down the essential components of this declaration and understand why it matters. 🔍 Key Components of the Fit and Proper Declaration To ensure that only trustworthy and competent individuals assume control or significant positions in NBFCs, the RBI mandates a comprehensive declaration covering the following: 1. 🚫 No Association with Disqualified Entities The individual must not be linked to any unincorporated body accepting public deposits. No ties with companies whose NBFC registration was previously refused by RBI. 2. ⚖️ No Criminal Charges There should be no pending criminal cases, including those under the Negotiable Instruments Act. 3. 🎓 Educational and Professional Background Disclosure of academic qualifications. Relevant experience in the financial sector is essential to demonstrate competence. 4. 📜 Clean Track Record The individual must have a reputation free from litigation or regulatory violations. A history of ethical conduct and compliance is crucial. 5. 💰 Source of Funds Clear declaration of the origin of funds used for acquisition. Transparency in financial dealings is a cornerstone of RBI’s assessment. 6. 🏢 Ownership and Banking Details Information on ownership in other entities. Bankers’ reports and other documents supporting financial soundness. Compliance with RBI’s suitability assessment norms. 📝 Submission Process This declaration is submitted along with the application to RBI by the NBFC seeking prior approval for any change in its management or shareholding structure. It forms a critical part of RBI’s due diligence process. 🛡️ Why It Matters The fit and proper criteria are not just regulatory formalities—they are safeguards. By enforcing these standards, RBI ensures: Protection of depositors’ interests. Stability and integrity of the financial system. Prevention of misuse or mismanagement within NBFCs. In essence, this declaration assures RBI that the proposed directors or shareholders meet high standards of integrity, competence, and financial probity before any acquisition or takeover is approved. 📚 Source : www.rbi.org.in Disclaimer: The content of the blog does not create any responsibility of the firm / its authorized persons whose website is being accessed. The blog is not for legal use. Kindly verify the correctness of data/contents from your own sources. This is only for information purpose. Add a Comment Name: Your Comment: View Comments (0)

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