Microfinance Company Registration

– Register your Microfinance Company online
– Starting At Rs.1,90,000-/ (inclusive all taxes & fees)..!!!
– Section 8 Microfinance without RBI approval,
– SAVE 50% COST…!!!
(Takes 25 to 30 Days) 

Micro Finance Registration

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What is a Micro Finance Company?

A microfinance company is basically a type of financial institution which provides 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 are not eligible for loans. They provide small loans amounting to less than Rs.50,000 in amount to people who reside in rural areas and for the people who reside in urban areas, the loan amount limit is Rs.1,25,000. The simplest way to register a Micro Finance Company in India is to register a Section-8 Company with MCA (Ministry of Corporate Affairs), without the charge of any kind of marginal money or guarantee security. A microfinance company can give loans at inexpensive rates directed by the RBI and central government. They provide huge support to all the rural and agricultural development including the creation of both income and employment. There are basically 2 types of microfinance companies that are allowed in India, the former type has to be registered with the RBI and the latter is the non-profit type, which is registered as a section 8 company and does not need RBI approval.

How to register the micro-finance Companies in India?

A microfinance company can be registered in India in the form of a Section 8 company, as a Section 8 company does not need any minimum capital. Here is the process:

Mandatory Requirements for Micro Finance Company

There are essentially 2 ways to register for a Micro Finance Institution (MFI). One way is to form a company and then apply to RBI for approval. The minimum requirements for a “Microfinance company” are Rs.5 crore net owned fund and active profiles of promoters. The second way is to register as a section 8 company. LegalRaasta offers the second way of registration. Apply for central government licenses features of which are as follows:

  • An amount of Rs.50,000 can be given for business purposes and Rs.1,25,000 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..

NO RBI APPROVAL

In India, finance businesses are approved only to Non-Banking Finance Companies (NBFC). 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 it’s master circular: RBI/2015-16/15 DNBR (PD) CC.No.052/03.10.119/2015-16 Dated July 01, 2015, has released all the Section 8 Companies involved in microfinance activities and are exempt from the provisions of RBI Act, 1934

As per Para 2 (iii), Sections 45-IA, 45-IB, and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934) shall not apply to any non-banking financial company which is
(a) Engaged in micro financing activities, providing credit not exceeding Rs.50,000 for a business enterprise and Rs.1,25,000 for meeting the cost of a dwelling unit to any poor person for enabling him to raise his level of income and standard of living; and
(b) Licensed under Section 25 of the Companies Act, 1956; and
(c) Not accepting public deposits as defined in paragraph 2(1) (xii) of Notification No. 118 /DG (SPT)-98 dated January 31, 1998.

What is Included In Our Package?

Advantages of Micro Finance Company

Why to register for Microfinance company?

Some of the working mechanisms of a 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.

  • 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. A Section 8 company will comply with Companies Act the same way as other companies do. That’s all!

Procedure For Microfinance Company

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 a Micro Finance Company (MFI)

Acceptance of Deposits under Micro Finance Company

Deposits are not permitted to be accepted under a section 8 company. Moreover, the company has to invest it’s funds and start it’s operations. Further, the company may also raise funding by way of donations.

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

Hence, it is advised if you are thinking to register your own NBFC, first start with a “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 are against monthly repayments or weekly repayments. Interest is charged often in the range of 20 -26%. Besides the following points are also important:

  • An NBFC can impose a differential rate of interest to it’s customers but the change must not be more than 4%.

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

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

  • Companies must issue a loan card to all the 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 a 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 be met by the Micro Finance Company. However, the most important compliances are as follows:

Frequently Asked Questions

What is a microfinance company?
How to get a microfinance company registered?
Which documents are required to register microfinance companies?
What are the benefits of registering a microfinance company?
What is the registration fee of the Microfinance comapny?
Can Microfinance companies provide loans for the personal use of borrowers?
Does the Prepayment penalty be imposed by Microfinance companies?
What are the limitations of interest rate & loan processing charges of Microfinance companies?