{"id":14651,"date":"2018-09-18T13:23:34","date_gmt":"2018-09-18T13:23:34","guid":{"rendered":"https:\/\/www.legalraasta.com\/blog\/?p=14651"},"modified":"2026-04-07T17:17:29","modified_gmt":"2026-04-07T11:47:29","slug":"difference-between-nbfc-and-microfinance-companies","status":"publish","type":"post","link":"https:\/\/www.legalraasta.com\/blog\/difference-between-nbfc-and-microfinance-companies\/","title":{"rendered":"Difference between NBFC and Microfinance Companies"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_73 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.legalraasta.com\/blog\/difference-between-nbfc-and-microfinance-companies\/#Non-Banking_Financial_Company_Vs_Micro_Finance_Institution\" title=\"Non-Banking Financial Company Vs Micro Finance Institution\">Non-Banking Financial Company Vs Micro Finance Institution<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.legalraasta.com\/blog\/difference-between-nbfc-and-microfinance-companies\/#What_are_NBFCs\" title=\"What are NBFCs?\">What are NBFCs?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.legalraasta.com\/blog\/difference-between-nbfc-and-microfinance-companies\/#Categories_of_NBFCs\" title=\"Categories of NBFCs\">Categories of NBFCs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.legalraasta.com\/blog\/difference-between-nbfc-and-microfinance-companies\/#What_is_Microfinance_Companies\" title=\"What is Microfinance Companies?\">What is Microfinance Companies?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.legalraasta.com\/blog\/difference-between-nbfc-and-microfinance-companies\/#Difference_between_NBFC_and_Microfinance_Companies\" title=\"Difference between NBFC and Microfinance Companies\">Difference between NBFC and Microfinance Companies<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Non-Banking_Financial_Company_Vs_Micro_Finance_Institution\"><\/span><strong><span style=\"color: #000000;\">Non-Banking Financial Company Vs Micro Finance Institution<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In India, Banks have some certain limitations because they are not able to open branches in remote and inaccessible places as India is geographically large country. Due to this, NBFCs and MFIs are being operated in rural parts of the country to meet banking requirements of the people. Although, both of these types of entities serve the basic and main purpose of providing banking facilities. However, there are some differences between the two entities.\u00a0 In this article, we will let you know about the differences between NBFC and Microfinance companies.<\/p>\n<p>For further information regarding\u00a0<a href=\"https:\/\/www.legalraasta.com\/blog\/classification-of-nbfcs-in-india\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Classification of NBFCs in India&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:573,&quot;3&quot;:{&quot;1&quot;:0},&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;12&quot;:0}\">Classification of NBFCs in India,<\/span><\/a>\u00a0and <a href=\"https:\/\/www.legalraasta.com\/nbfc-registration\/\" target=\"_blank\" rel=\"noopener noreferrer\">NBFC registration<\/a> you can follow our <a href=\"https:\/\/www.legalraasta.com\/blog\/\" target=\"_blank\" rel=\"noopener noreferrer\">blog<\/a>.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_are_NBFCs\"><\/span><span style=\"color: #000000;\"><strong>What are NBFCs?<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The term NBFC (Non-Banking Financial Company) refers to a company which is registered under the Companies Act and is regulated by the Reserve Bank of India under the RBI Act,1934. The activities are related to lending and other activities that it includes are providing loans and advances, credit facility, savings and investment products, trading at money market, managing portfolios of stocks, transfer of money etc. All NBFCs are engaged in hire purchase, leasing, infrastructure finance, venture capital finance, housing finance etc. NBFCs are allowed to accepts deposits but only term deposits. But deposits which are repayable on demand are not accepted by NBFC.<\/p>\n<p>Read more:\u00a0<a href=\"https:\/\/www.legalraasta.com\/blog\/due-diligence-nbfc\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Procedure for Due Diligence of NBFC&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:8403901,&quot;3&quot;:{&quot;1&quot;:0},&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;10&quot;:2,&quot;11&quot;:0,&quot;12&quot;:0,&quot;14&quot;:[null,2,0],&quot;15&quot;:&quot;Calibri, sans-serif&quot;,&quot;16&quot;:11,&quot;26&quot;:400}\">Procedure for Due Diligence of NBFC<\/span><\/a><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Categories_of_NBFCs\"><\/span><span style=\"color: #000000;\"><em>Categories of NBFCs<\/em><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>There are mainly three kinds of companies under Non- Banking Financial institutions which are following:<\/p>\n<ol>\n<li>Asset companies<\/li>\n<li>Loan Companies<\/li>\n<li>Investment Companies<\/li>\n<\/ol>\n<p>As NBFCs can not issue cheques drawn on itself as well as it cannot accept saving deposits in the manner that a bank does so there is a difference between NBFCs and Banks. Apart from this, Money deposited in any NBFC does not have any guarantee like Banks. Moreover, it performs banking functions at a smaller scale in comparison to banks. Read here for\u00a0<a href=\"https:\/\/www.legalraasta.com\/blog\/annual-compliance-nbfcs-india\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Annual Compliance of NBFCs in India&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:573,&quot;3&quot;:{&quot;1&quot;:0},&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;12&quot;:0}\">Annual Compliance of NBFCs in India.<\/span><\/a><\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_is_Microfinance_Companies\"><\/span><span style=\"color: #000000;\"><em><strong>What is Microfinance Companies?<\/strong><\/em><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Microfinance Company or Institution (MFI) exists at a smaller level in comparison to <a href=\"https:\/\/www.legalraasta.com\/nbfc-registration\/\" target=\"_blank\" rel=\"noopener noreferrer\">NBFC<\/a>. It is serving the similar motive as NBFC to the underprivileged and impoverished sections of the society that do not have an access to banking facilities. MFI provides small funds that can vary from Rs. 1000-20000 to the poor people for starting a business. There are also some complaints of MFIs regarding irregularities in the functioning as it charges higher interest rates from the poor. Besides, it mainly indulges in providing loans in contravention to the directives issued to such MFI to newly formed groups within 15 days of formation. In some instances, it has been noted that when MFIs get the sanction of credit facility after this there is no review of the functioning of MFI.<\/p>\n<p>The state government has taken some necessary steps to convert MFI into NBFC which are better regulated by RBI. Rather MFIs wants to get NBFC status because they will get access to wide-scale funding from banks.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Difference_between_NBFC_and_Microfinance_Companies\"><\/span><span style=\"color: #000000;\"><em><strong>Difference between NBFC and Microfinance Companies<\/strong><\/em><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Both NBFC and Microfinance Companies play an important role in rural areas. When there is an absence of banks in the rural areas then Non-banking financial institution performs similar functions as banks perform. Although, Non-Banking Financial company cannot issue checks drawn on itself. On the other hand, MFI stands for Microfinance institutions which are established to operate at a smaller level than NBFC and provide small loans facilities to the underprivileged sections of the society.<\/p>\n<p>For further information\u00a0regarding <a href=\"https:\/\/www.legalraasta.com\/nbfc-registration\/\" target=\"_blank\" rel=\"noopener noreferrer\">NBFC registration<\/a> you can reach to our website: <a href=\"https:\/\/www.legalraasta.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Legal Raasta<\/a><\/p>\n<p>Give us a call at <a href=\"tel:+918750048585\">+918750048585<\/a> and you can also send your query on Email: <a href=\"mailto:contact@legalraasta.com\" target=\"_blank\" rel=\"noopener noreferrer\">contact@legalraasta.com<\/a><\/p>\n<blockquote>\n<p>Related Articles:<\/p>\n<p><a href=\"https:\/\/www.legalraasta.com\/blog\/nbfc-nidhi-company-microfinance-company\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;nbfc vs Nidhi company vs microfinance &quot;}\" data-sheets-userformat=\"{&quot;2&quot;:573,&quot;3&quot;:{&quot;1&quot;:0},&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;12&quot;:0}\">NBFC vs Nidhi company vs microfinance <\/span><\/a><\/p>\n<p><a href=\"https:\/\/www.legalraasta.com\/blog\/nbfc-mfi-registration-and-requirements\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;NBFC Micro Finance Institution Requirements &amp; Registration&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:573,&quot;3&quot;:{&quot;1&quot;:0},&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;12&quot;:0}\">NBFC Micro Finance Institution Requirements &amp; Registration<\/span><\/a><\/p>\n<p><a href=\"https:\/\/www.legalraasta.com\/blog\/nbfc-mfi-directions-in-india\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Micro Finance Institutions' (NBFC-MFIs) \u2013 Directions&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:573,&quot;3&quot;:{&quot;1&quot;:0},&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:[null,2,0]},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;12&quot;:0}\">Micro Finance Institutions&#8217; (NBFC-MFIs) \u2013 Directions<\/span><\/a><\/p>\n<\/blockquote>\n<p>&nbsp;<\/p>\n<div class=\"sharedaddy sd-sharing-enabled\">\u00a0<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Non-Banking Financial Company Vs Micro Finance Institution In India, Banks have some certain limitations because they are not able to open branches in remote and inaccessible places as India is geographically large country. Due to this, NBFCs and MFIs are being operated in rural parts of the country to meet banking requirements of the people. Although, [&hellip;]<\/p>\n","protected":false},"author":15,"featured_media":13553,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[141],"tags":[],"class_list":["post-14651","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-nbfc"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Difference between NBFC and Microfinance Companies | Legal Raasta |<\/title>\n<meta name=\"description\" content=\"NBFC and MIcrofinance Companies serve the basic and main purpose of providing banking facilities to the underprivileged rural areas.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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