A cancellation or proposed cancellation of an NBFC’s Certificate of Registration (CoR) is one of the most serious regulatory events an NBFC board can face. It threatens not just the company’s license to lend, but its reputation, existing loan book, lender relationships, and the going-concern assumption itself. Yet, cancellation is not necessarily the end of the road — the law expressly provides a right of appeal, and many NBFCs have successfully reversed or mitigated RBI’s adverse orders through well-argued, evidence-backed appeals.
Under Section 45-IA(7) of the RBI Act, 1934, a company whose CoR has been cancelled may prefer an appeal to the Central Government within 30 days from the date of receipt of the order. The appeal must be carefully drafted, supported by legal and factual grounds, compliance remediation, and robust documentation — failing which the window closes and the cancellation becomes final.
We provide end-to-end advisory for NBFCs facing show-cause notices, in-principle cancellation decisions, or already-issued cancellation orders — covering response strategy, appeal drafting, representation, remediation, and parallel compliance steps needed to protect the NBFC’s interests.
The statutory appeal window is only 30 days from the date of receipt of the cancellation order under Section 45-IA(7). Delay in action can permanently extinguish the right to appeal. If you have received a show-cause or cancellation order, contact specialist counsel immediately.
Drafting detailed, evidence-based replies to show-cause notices issued by RBI before cancellation is confirmed.
Detailed legal and factual review of RBI’s cancellation order, identifying grounds and strategy.
Preparation of appeal to the Central Government under Section 45-IA(7) with legal and factual grounds.
Building a robust documentary record — NOFs, audits, filings, remediation proof, and expert reports.
Representation before RBI, Ministry of Finance, and appellate authorities during hearings and meetings.
Advisory on writ petitions before the jurisdictional High Court under Article 226 / 227 where warranted.
Parallel closure of compliance gaps — NOF, returns, policies, KYC, governance — to strengthen the appeal.
Support in managing lenders, customers, auditors, and rating agencies during the appeal process.
Failure to maintain the prescribed Net Owned Funds required under applicable RBI directions.
NBFC has not commenced financial business within stipulated time from grant of CoR.
Persistent failure to file periodic returns such as NBS-1, NBS-2, NBS-7, and ALM returns.
Directors or promoters found unfit based on RBI’s Fit and Proper Criteria or adverse events.
Assets or income do not meet the principal business criteria of financial activity.
Change in management or shareholding beyond thresholds without prior RBI approval.
Serious lapses in customer due diligence, PMLA compliance, and suspicious transaction reporting.
Financial irregularities, suppression of facts, or serious breach of RBI directions and conditions.
RBI issues an SCN highlighting the grounds on which it proposes to cancel the CoR, giving the NBFC an opportunity to respond within the time prescribed in the notice.
The NBFC submits a detailed reply supported by documents, with an opportunity of personal hearing before RBI. This stage often gives the best chance to avoid a cancellation order.
If unsatisfied, RBI passes a speaking order cancelling the CoR under Section 45-IA of the RBI Act. The order is communicated in writing to the NBFC.
Within 30 days of receipt of the order, the NBFC may file a detailed appeal to the Central Government (Ministry of Finance) under Section 45-IA(7), seeking setting aside or modification.
The Central Government considers the appeal, grounds, and records, provides hearing, and passes a reasoned order confirming, modifying, or setting aside the cancellation.
If the appellate order remains adverse or involves legal infirmity, a writ petition may be filed before the jurisdictional High Court under Article 226 / 227.
RBI has issued an SCN proposing cancellation, compounding, or other adverse action.
Adverse observations in RBI inspection report that may lead to regulatory action.
RBI has already passed a cancellation order and the 30-day clock is running.
Backlog of unfiled returns, NOF shortfall, or unresolved compliance observations.
Inactive NBFC facing cancellation due to non-commencement of financial business.
Allegations of unauthorized change in management or shareholding pattern.
Directors or promoters facing Fit & Proper or reputational challenges at RBI.
Central Government has rejected the appeal, and writ remedy is under consideration.
If you have received a show-cause notice or cancellation order from RBI, speak to our specialists today to preserve your NBFC license and plan a strong, compliant response.
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