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Microfinance Company Registration

– Register your Microfinance Company online

– Starting At Rs.1,90,000-/ (inclusive all taxes & fees)..!!!

– Microfinance registration by section 8 Company,

– No RBI Approval,

– SAVE 50% COST…!!!

  (Takes 25 to 30) 

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Procedure For Microfinance Company

NAME APPROVAL APPLICATION

Details given by you will be checked and then we will apply for name approval.

 

DSC (DIGITAL SIGNATURE)

After submitting your documents we will give you DSC and DPIN.

APPLY FOR DIN

Director Identification Number is a Unique Number that is given to Existing Directors of Incorporated Companies.

 

CERTIFICATE OF INCORPORATION

File for Incorporation Certificate will be forming with CIN, PAN & TAN.

 

PAN AND TAN APPLICATION

Apply for PAN & TAN as they will be needed for opening a bank account.

 

What is a Micro Finance Company?

The Microfinance Company is basically the financial institutions that provide small-scale financial services in the form of loan, credit or savings. These companies are introduced to ease the credit system for small businesses as they don’t get a loan from banks due to their complex process. Therefore it is commonly named as a Micro-credit organization. They offer small loans to various small businesses or households that do not have access to formal banking channels or eligibility for loans. They provide small loans that are less than Rs.50,000 for rural areas and for urban it is Rs.1,25,000. The simplest way to register a Micro Finance Company in India is to register the Section-8 Company with MCA ( Ministry of Corporate Affairs). Without charging any marginal money or guarantee security. It can give loans at inexpensive rates directed by the RBI and central government. They are a huge support to all rural and agricultural development including income and employment creation. There are basically 2 types of microfinance companies that are allowed in India, one is which has to be registered with the RBI and another is the non-profit type, which is registered as section 8 company and does not need RBI approval.

How to register the micro-finance Companies in India?

The microfinance can be registered in India by Section 8 company. Section 8 does not need any minimum capital. Here is the process:

Prepare DSC & file for Name Approval:

The first step is to apply DSC and DIN. This takes some time for 1-2 days. It is used for signing the online forms, filed with ROC for Incorporation Of Company. DSC cannot be used in Physical Documents. The Company Registration in the procedure is completely online and so it requires DSC to incorporate a company. Thereafter, you require to file for name approval. Name Applications under RUN will be processed by the Central Registration Centre (CRC). The Name Approval is subject to complete check by the CRC and thereafter Approval Or Rejection must be communicated by E-Mail to the Applicant. The name should be unique and must end with words like foundation, Sanstha, etc. Moreover, a maximum of 6 names can be filed at one time.

Apply for DIN:

Director Identification Number is a Unique Number that is given to Existing Directors of Incorporated Companies. This identification number is given by the Central Government to any Individual, planning to be appointed as Director or to any Existing Director of a Company. Once Got DIN Number, the Director can apply the same for life irrespective of the company he/she works in. If you change the company it doesn’t change the DIN Number.

Certification of Incorporation:

The third step is to file the incorporation along with all necessary papers. The form is joined with all the necessary attachments like MOA, AOA, declarations, etc. Incorporation certificate must be forming with CIN, PAN & TAN. The company has to pay the Stamp Duty Irrespective of the Capital as Stamp Duty is a state subject. Once the company is incorporated, you can start the microfinance business in India. But, please remember that you cannot take any deposit under section 8. After that immediately apply for PAN And TAN as they will be requiring to open A Bank Account.

Mandatory Requirements for Micro Finance Company

There are essentially 2 ways to register the Micro Finance Institution (MFI). One way is to form a company and then apply to RBI for approval. The least requirements for Microfinance company is Rs.5 crore net owned fund and active profiles of promoters. The second way is to register a section 8 company.

LegalRaasta offers the second way of registration. Apply for central government licenses features of which are as follows:

The highest Rs.50,000 can be given for business purposes and Rs.125,000 for household dwelling.
No least net owned fund requirement. You can choose on your own
No RBI approval is needed since RBI has exempted this company from registration and some different conditions.

NO RBI APPROVAL

In India, finance businesses are approved only to Non-Banking Finance Companies (NBFC) and directed by RBI. However, some business forms have been granted an exemption by the Reserve Bank of India (RBI) to do banking activities up to a specified limit. The RBI by its master circular: RBI/2015-16/15 DNBR (PD) CC.No.052/03.10.119/2015-16 Dated July 01, 2015, has released all Section 8 Companies involved in microfinance activities.

As per Para 2 (iii), Sections 45-IA, 45-IB, and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934) must not apply to any non-banking financial company which is involved in activities:
(a) Engaged in micro-financing activities, giving credit not more than Rs. 50,000 for a business enterprise. And, Rs. 1,25,000 for meeting the cost of a housing unit to any poor person for letting him raise his level of income and standard of living.
(b) Licensed under Section 8 of the Companies Act, 2013
(c) Not taking public deposits as described in paragraph 2(1) (xii) of Notification No. 118 /DG (SPT)-98 dated January 31, 1998.

What is Included In Our Package?

DIN for 2 Partners

Digital Signature For 2 Directors

Name search & approval

MOA/AOA

Registration Fees

Company Pan Card

Advantages of Micro Finance Company

No minimum capital of 5 Cr

No RBI approval

Easiest way to start finance business

Can charge up to 26% rate of interest.

Why to register for Microfinance company?

Some of the working mechanism of micro-finance companies are as follow:

Promoting socio-economic growth : At the community level, the microfinance company will promote socio+ecomic growth. Also, empowering self-help groups along with facilitating sustainable development by them. A variety of other financial services will be required by the poor and not just loans; hence, it is a powerful tool to eliminate the poverty factor.

No RBI Approval : No long procedures and easy to register as there is no RBI approval required when you register as a non-profit company. Even, there is no need for minimum capital of Rs. 2 Crores.

Provide a way to funding : It gives a better overall loan repayment rate than traditional banking products. Further, which will help in meeting credit needs for such a population range from emergency loans, consumer loans, business loans, working capital loans, housing, etc.

Offers reasonable services for small businesses : It focuses on building a financial system for the poor and unemployed and aims to make permanent local financial institutions that try to attract domestic deposits, recycle them into loans, and give other financial services.

Minimum Compliances : Company is expected to comply with RBI standards even if it is not required to register with the reserve bank. But no approval from RBI is needed. Section 8 company will comply with Companies Act the same way as other companies do. That’s all!

Documents Required

PAN card : In the case of Indian citizens, the PAN card of shareholders and directors.

Passport size photograph: Not more than 10 months old photograph of directors and shareholders.

ID proof : Copy of Aadhaar card/voter identity card/passport/driving license of directors and shareholders

Rent agreement : If you have rented property, then a copy of rent agreement

Address proof : Electricity bill, water bill, bank statement, gas or telephone bill of shareholders and directors

Registered office proof : Electricity bill, water bill, bank statement, gas or telephone bill of the registered office address

NOC from the owner : No objection certificate is needed from the owner of the registered office

Interest Rates on loans

There are usually 3 types of charges that can be imposed by the Micro Finance Company (MFI)

Interest Charge:

The average interest rate must not exceed 26%.

Processing charge:

The processing charge should not more than 1% of the gross loan amount.

Insurance premium:

Only the actual cost of insurance for group, life, health, etc to be charged and no extra is permitted as per RBI policy.

Calculation of Interest Rate for Micro Finance

The rates of interest charged by Micro Finance Companies must be less of the following:

  •  Cost of funds plus 12% margin or
  •  Average base rate multiplied by 2.75.

Acceptance of Deposits under Micro Finance Company

Deposits are not permitted to be accepted under section 8 company. Moreover, the company has to invest its funds and start your microfinance company. Further, the company may also raise funding by way of donations.

Even if you are intending to register an NBFC company and ready to invest Rs.5 Crore into the business, then also deposits are not permitted to be taken. As per the RBI procedure, first, you require to register an NBFC non-deposit-taking company and consequently apply for deposit-taking status from the Reserve Bank of India (RBI).

Hence, it advised if you thinking to register your own NBFC, first start with microfinance company, test your skills and then move forward.

Micro-credit loans under Micro Finance Company

Loans under microfinance companies are not very complicated. Most unsecured loans are given and against monthly repayments or weekly repayments. Interest is charged often in the range of 20 -26%. Besides the following points are also important which are as follows:

NBFC can impose a differential rate of interest to its customers but change must not be more than 4%.

The interest on the loan to be charged on decreasing balance method.

Microfinance companies to show in all the offices or literature, the effective rate of interest.

Companies must issue a loan card to all members saying the interest rate, all different terms & conditions.

Loans are also provided in self-help groups (SHG) and other link programs.

If no repayment is received within 90 days, then the same must be treated as a non-performing asset, though, provisioning norms do not apply to section 8 company.

Type of Legal Structure for Microfinance Company Registration

Particulars

NBFC-MFI

Societies and Trust

Section 8 Company

Cooperative Society

Govern by As per Companies Act, 2013 with the Reserve Bank of India Society Registration as per Society Registration Act, 1860 and Trust Registration as per Indian Trust Act, 1882 Registration as per Companies Act, 2013 Registration as per the Cooperative Societies Act, 2002
Net Worth Requirement Rs. 5 Crore and Rs. 2 Crore in case of North East States No Minimum Requirement No Minimum Requirement No Minimum Requirement.

 

Mandatory Compliances for Micro Finance Company

There are minimum compliances which are to comply by the Micro Finance Company, however, the most important compliances are as follows:

RBI Compliance:

The company is expected to comply with RBI norms even if it is not required to register with the reserve bank.

Company Act:

Section 8 company also required to comply with the Companies Act, in the same way, other companies.

Additional:

There are other laws as well which are to be taken care of like PMLA etc if talk about the mandatory compliances.

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Frequently Asked Questions

What is a microfinance company?

Microfinance is also named as microcredit. It is a financial service that gives loans, savings, and insurance to entrepreneurs and small business owners who don’t have access to traditional sources of capital, like banks or investors.

How to get a microfinance company registered?

For microfinance company registration follow the following steps :

1) File Name Approval Application
2) Apply for DIN & DSC
3)Certificate of Incorporation
4) PAN & TAN Application

Which documents are required to register microfinance companies?
  • Copy of PAN Card
  • Aadhar Card
  • Address Proof (Bank Statement, Mobile Bill, Telephone Bill),
  • Passport Size Photo
  • Ownership Proof (Electricity bill etc)
  • Utility Bill (Gas bill, Electricity bill)
  • NOC(Download format)
What are the benefits of registering a microfinance company?
  • It benefits in fostering self-reliance and entrepreneurship.
  • Constant and smooth access to funding.
  • High-grade overall loan repayment rate in correlation to traditional bank
What is the registration fee of the Microfinance comapny?

The starting registration fees for Microfinance Company is Rs.1,190,000/-

Can Microfinance companies provide loans for the personal use of borrowers?

Yes, the loan can be provided for the personal purpose of the borrowers by Microfinance companies, the still aggregate amount cannot exceed 30% of the total loan.

Does the Prepayment penalty be imposed by Microfinance companies?

No, the prepayment penalty cannot be imposed by Microfinance companies.

What are the limitations of interest rate & loan processing charges of Microfinance companies?

Microfinance Companies are not available to charge a higher rate of interest from the directed rate of interest and most variation cannot exceed 4% while if we talk about loan processing costs then it cannot exceed 1% of the gross loan amount. Microfinance Companies can levy loan insurance charges individually.