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RBI opened ‘other financial services’ to 100% foreign investment on the automatic route back in 2016, and its January 2025 update made it materially easier to fund an NBFC’s minimum capital with foreign money. None of that replaces RBI’s separate sign-off on the entity itself — its promoters, its capital structure, its fitness to hold a Certificate of Registration. CS Chetna Shoor structures the investment and the registration together.
Foreign investment into an NBFC engaged in RBI-regulated financial activities has been permitted up to 100% under the automatic route since RBI’s Notification 375/2016-RB, and the minimum capitalisation norms that once scaled with the percentage of foreign holding were eliminated the same year — each financial sector regulator now prescribes its own capital norms instead. For NBFCs, that norm is RBI’s minimum Net Owned Fund requirement, currently ₹2 crore at the registration stage under RBI’s Scale Based Regulation framework.
Automatic route means no prior government approval is needed for the investment itself — it doesn’t mean the NBFC is exempt from RBI’s separate regulatory gate. Every NBFC still needs a Certificate of Registration from RBI’s Department of Regulation, foreign promoters and directors still go through fit-and-proper vetting, and if the investing entity is itself foreign-owned or controlled, the downstream investment rules for FOCCs kick in on top of the FDI route classification. RBI’s January 2025 update to the Master Direction on Foreign Investment added real flexibility here — including a general permission letting a foreign investor directly fund an NBFC’s minimum Net Owned Fund requirement at registration, without the Department of Economic Affairs approval that route used to require. This page is for promoters raising foreign capital into a new or existing NBFC who need the FDI route, the capital structuring, and the RBI registration process to move together, not in sequence with gaps between them. Chetna reviews the investor structure, the NBFC’s activity classification, and the capital plan before the money moves.
For NBFCs engaged in 'other financial services' regulated by RBI, SEBI, IRDAI, or PFRDA
Minimum Net Owned Fund required at the NBFC registration stage
Effective date of RBI's updated Master Direction on Foreign Investment
Eliminated in 2016 for the 18 (now expanded) specified NBFC activities
Wherever the investing entity is itself foreign-owned or controlled, on a downstream investment
Legal basis, read with RBI's Master Direction on Foreign Investment
RBI rejects over 40% of NBFC applications on the first attempt. Here’s what actually causes it.
FEMA's automatic route removes the need for government approval on the investment. It says nothing about RBI's Department of Regulation, which independently vets the NBFC's promoters, capital structure, and business plan before issuing a Certificate of Registration. A deal that's FEMA-compliant can still stall at the registration stage.
If the entity investing into your NBFC is itself foreign-owned or controlled, the investment is treated as an indirect foreign investment under the FOCC rules — with its own pricing, reporting, and Form DI obligations — regardless of how straightforward the NBFC's own activities are.
RBI's fit-and-proper requirements for NBFC promoters and directors apply on onboarding and again on every subsequent change — a new foreign director added a year after registration triggers the same vetting the original investors went through.
A non-resident investor subscribing directly to shares of the Indian NBFC — the most common route, reported via FC-GPR, and generally automatic-route if the investor isn't from a sector requiring government approval.
Where the investing Indian entity is more than 50% non-resident owned or non-resident controlled, its investment into the NBFC is treated as indirect foreign investment, carrying the same sectoral conditions as direct FDI plus its own Form DI reporting.
A narrower route permitting a foreign investor to directly capitalise an NBFC applicant's minimum Net Owned Fund at the registration stage — funds under this route can't be redirected to business expansion or operating expenses.
We confirm whether the investment is direct FDI or a downstream FOCC investment, and identify the applicable route and conditions.
Minimum Net Owned Fund requirement mapped against the funding plan, including eligibility for the January 2025 direct-funding relief where applicable.
KYC, net-worth, and background documentation compiled for every foreign promoter and director ahead of RBI submission.
Full application filed with RBI's Department of Regulation, with direct handling of every query during review.
Share allotment reported via FC-GPR, with Form DI filed separately for any FOCC downstream investment.
Director changes, shareholding changes, and scale-based layer classification tracked and filed as they arise.
FC-GPR filed within 30 days of every future share allotment to a non-resident.
Form DI filed within 30 days for any reclassification of an investor as an FOCC, or any downstream investment made through one.
Fit-and-proper vetting repeated for every new director or promoter added after registration.
Annual FLA Return filed for as long as the NBFC carries foreign investment on its books, alongside RBI's regular NBFC regulatory returns.
CS Chetna Shoor’s team replies within 4 hours on WhatsApp.
Yes — foreign investment up to 100% is permitted under the automatic route for NBFCs engaged in ‘other financial services’ regulated by RBI, SEBI, IRDAI, or PFRDA, with no minimum capitalisation cap since RBI’s 2016 liberalisation.
No. Automatic route removes the need for government approval on the investment itself, but the NBFC still needs a Certificate of Registration from RBI’s Department of Regulation, which independently reviews promoters, capital, and the business plan.
A Foreign-Owned or Controlled Company is an Indian entity more than 50% owned or controlled by non-residents. If an FOCC invests into your NBFC, that investment is treated as indirect foreign investment under the downstream investment rules, with its own pricing and Form DI reporting obligations.
Yes, under RBI’s January 2025 relief, a foreign investor can directly capitalise an NBFC applicant’s minimum Net Owned Fund at the registration stage without the earlier requirement for Department of Economic Affairs approval, though the funds are restricted to that purpose.
RBI’s fit-and-proper vetting applies again — the new director’s KYC, background, and suitability documentation must be filed and cleared, independent of whatever vetting the original promoters went through at registration.
Qualified Company Secretary · ICSI Member · Founder, Expertvuw Management Pvt Ltd
Chetna has guided NBFC promoters through RBI’s COR process end to end, with particular focus on structuring the Net Owned Fund and business plan so the application survives first-round RBI scrutiny rather than coming back with a query.