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A clean-looking balance sheet and a valid Certificate of Registration tell you very little about what you’re actually buying. CS Chetna Shoor runs an NBFC-specific diligence framework — RBI history, book quality, and governance fit — before you sign anything binding.
Standard financial, legal, and tax due diligence — the checklist most M&A advisors run for any acquisition — misses several risk areas specific to NBFCs. RBI correspondence history, Net Owned Fund composition and quality, Principal Business Criteria compliance, Scale Based Regulation layer position and governance fit, loan book asset quality and provisioning adequacy, and co-lending or assignment contracts carrying off-balance-sheet risk all sit outside a generic diligence framework, even one labeled for “financial services.”
This page is for buyers, private equity investors, or corporates evaluating an NBFC acquisition who need a diligence framework built specifically for NBFC risk. Chetna structures the review around what RBI itself would scrutinize, so findings translate directly into deal terms and feed cleanly into the RBI acquisition-of-control approval that follows.
Full history review, not just the current Certificate of Registration status
Composition and source-of-funds verification, not just the headline capital number
NPA recognition and provisioning adequacy on any active loan book
Confirming governance actually matches the target's current or approaching layer
Co-lending and assignment contracts reviewed as agreements, not inferred from financials
Findings feed directly into the RBI acquisition-of-control approval that follows diligence
RBI rejects over 40% of NBFC applications on the first attempt. Here’s what actually causes it.
RBI's own correspondence and inspection history often reveal issues audited financial statements never will, since financial statements aren't required to disclose an unresolved supervisory query, a pending show-cause notice, or a past penalty that hasn't recurred since.
Co-lending and loan assignment contracts shift risk and servicing obligations outside the standard balance sheet. A diligence process that stops at the financial statements — rather than reviewing these contracts directly — will miss them entirely, along with whatever exposure they carry.
Fit-and-proper issues with existing directors, or a governance structure that doesn't actually match the target's current or approaching SBR layer, become the buyer's problem the moment the acquisition closes — they don't reset with new ownership, and RBI's approval process doesn't ignore them.
NBFC-specific diligence doesn’t replace standard M&A diligence — it adds a layer most generic processes don’t reach.
Financial statements, tax history, and standard legal and corporate checks — necessary but not sufficient for an NBFC target.
Adds RBI correspondence review, NOF quality assessment, SBR layer and governance fit, and off-balance-sheet contract review — the layer that actually catches NBFC-specific risk.
Once diligence clears, the findings feed directly into the RBI acquisition-of-control approval process. See our NBFC Takeover / Acquisition Advisory service for that filing.
We confirm what's already known about the target and what needs verification, so the review is scoped to genuine gaps.
Full RBI history requested and reviewed, alongside the target's core corporate documents.
NOF composition, source-of-funds, and — if the target has an active book — asset quality and provisioning adequacy assessed.
Co-lending and assignment contracts reviewed directly, alongside a governance fit assessment against the target's SBR layer.
A red-flag summary delivered to the buyer, informing valuation, warranties, or the decision to proceed.
Clean diligence findings feed directly into the RBI acquisition-of-control filing — see NBFC Takeover / Acquisition Advisory.
Diligence findings shape what happens next — they aren’t just a box-ticking exercise before signing.
Findings inform deal terms — valuation adjustment, specific warranties, or a walk-away decision.
Clean diligence feeds directly into the RBI acquisition-of-control approval filing.
Any remediation items identified become part of the post-acquisition compliance plan. See NBFC Annual RBI Compliance.
Governance or SBR gaps identified in diligence inform the compliance setup you'll need immediately after closing.
CS Chetna Shoor’s team replies within 4 hours on WhatsApp.
NBFC diligence adds a layer that standard financial, legal, and tax due diligence doesn’t reach — RBI correspondence history, Net Owned Fund quality, Scale Based Regulation layer and governance fit, and off-balance-sheet co-lending or assignment contracts. A generic M&A checklist, even one adapted for “financial services,” typically misses all four.
RBI correspondence can show unresolved supervisory queries, past show-cause notices, inspection findings, or penalties that never appear in audited financial statements, since financial reporting standards don’t require disclosure of regulatory correspondence in that level of detail. This history often gives a far more accurate picture of a target’s actual compliance standing than its balance sheet alone.
Co-lending and loan assignment arrangements shift risk-sharing and servicing obligations outside the target’s standard balance sheet. Reviewing the underlying contracts directly — rather than inferring exposure from financial statements — is the only way to see what risk the buyer is actually inheriting through these arrangements.
Co-lending and loan assignment arrangements shift risk-sharing and servicing obligations outside the target’s standard balance sheet. Reviewing the underlying contracts directly — rather than inferring exposure from financial statements — is the only way to see what risk the buyer is actually inheriting through these arrangements.
A term sheet is typically non-binding on the underlying deal terms, so diligence findings can still lead to a renegotiated valuation, added warranties or indemnities, or a walk-away decision if the issue is serious enough. This is exactly why diligence should run before final commercial terms are locked in, not treated as a formality between signing and closing.
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.