Micro Finance Company Registration in India
Empowering the underserved through financial inclusion.
Establish Your Micro Finance Company in India
Reach the unreached with essential financial services.
Get Started TodayWhat is a Micro Finance Company in India?
Microfinance companies are financial institutions that provide small-scale financial services, including credit and savings, primarily targeting the poor in rural, semi-urban, and urban areas. These services aim to assist individuals in engaging in economic activities, reducing vulnerability to income shocks, managing consumption patterns, fostering savings habits, and promoting self-empowerment.
In India, two types of microfinance companies can be registered:
- NBFC- Micro Finance Company
- Section 8 Micro Finance Company
Prerequisite of a Micro Finance Company in India
| Prerequisites for Microfinance Company Registration | NBFC | Section 8 Company |
|---|---|---|
| Approval of RBI | Mandatory | Not Required |
| Net Owned Funds | Minimum ₹5 crores | No minimum requirement |
| Director Experience | One director must have experience of more than 10 years in financial services | No prior experience required |
| Limit on Loans | Maximum of 10% of total assets | – Unsecured loan of ₹50,000 to small business – Loan up to ₹1.25 lakh to dwelling residence |
| Complexity of Registration | All processes involved in forming a company have to be performed | Relatively simple as it is registered as a non-profit organization |
| Adhering to Compliances | It has to adhere to all compliances of an NBFC | Adhere to compliance of RBI, but they are less stringent in comparison to NBFC |
| Number of Members | – For a private limited company: minimum of 2 – For a public limited company: minimum of 7 |
Minimum of 2 members |
| Status of Organization | Profit organization | Non-profitable organization |
Steps to Register Microfinance Company as an NBFC (Non-Banking Financial Company) in India
- Incorporate Your Company: Register as a Public or Private Limited Company with minimum capital.
- Ensure Capital Adequacy: Maintain Net Owned Funds (NOF) of at least ₹5 crores (₹2 crores for North Eastern states).
- Deposit Capital: Deposit the required capital in a fixed deposit with a scheduled commercial bank and obtain a No Lien Certificate.
- Apply for RBI License: Download the application form from the RBI website, fill it, scan it, and submit online with required documents. Also, submit a hard copy to the RBI’s Regional Office.
Steps to Register Microfinance Company as Section 8 Company
- Digital Signature Certificate (DSC): Obtain DSCs for the proposed directors.
- Name Approval: Select a unique name and get it approved by the MCA using web form RUN.
- Document Submission: Prepare and submit the Memorandum of Association (MoA) and Articles of Association (AoA) with finance object along with other necessary documents.
- Filing with RoC: File the web form INC-32 along with MoA, AOA and KYC documents with the Registrar of Companies (RoC).
- Certificate of Incorporation: Upon approval, receive the Certificate of Incorporation.
- Obtain PAN/TAN: PAN & TAN of the company will be issued along with incorporation certificate.
Required Documents to Register Micro Finance Company – NBFC in India
- Certificate of incorporation along with MOA and AOA of Company
- Auditor’s Certificate on Net Owned Fund
- Banker’s Certificate of No Lien on Fixed Deposit
- KYC of Directors along with passport size photograph, educational documents & relevant work experience in the financial sector
- Banker’s report about the company
- CIBIL Credit Report, income proof & CA certified net worth certificate of the organization
- Organization Structure Plan
Why Choose Indian Tax Planning for Microfinance Company Registration in India?
- Expert Guidance: Experienced professionals for NBFC and Section 8 registrations.
- Comprehensive Services:
- Incorporation of your company
- Ensuring capital adequacy
- Documentation and application preparation
- Filing applications with the RBI and ROC
- Compliance with regulatory requirements
- Hassle-Free Experience: Managing administrative and procedural tasks:
- Obtaining DSC and DIN for directors
- Drafting and filing MOA and AOA
- Coordinating with banks for capital deposit and No Lien Certificate
- Online and offline application submissions
- Timely Processing: Efficient processes for quick completion.
- Compliance Assurance: Ensuring all legal and regulatory requirements are met.
- Customized Solutions: Tailored services for NBFC and Section 8 companies.
- Post-Incorporation Support: Ongoing support for compliance and reporting.
Choosing Indian Tax Planning for your Microfinance Company registration in India ensures a smooth, efficient, and compliant process. Our expertise, comprehensive services, and dedicated support make us the ideal partner to help you build your dream business. Contact us today to get started.
FAQ
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What is a Micro Finance Company?
A financial institution that provides small loans to low-income individuals, promoting financial inclusion.
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How is it different from a bank?
It offers small, collateral-free loans to individuals, unlike banks that provide a range of financial services.
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What are the types of Micro Finance Companies?
· NBFC-MFI (Requires RBI approval)
· Section 8 Micro Finance Company (Non-Profit, No RBI approval needed) -
Is RBI approval required to start one?
Yes, for NBFC-MFI (₹5 crore capital required). No, for Section 8 Micro Finance Company.
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What are the eligibility criteria?
· Minimum 2 directors
· ₹5 crore capital (for NBFC-MFI)
· Registered under Companies Act -
Can it accept deposits?
No, Micro Finance Companies cannot accept public deposits.
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What is the maximum loan limit?
· ₹1.25 lakh for new borrowers
· ₹1.50 lakh for existing borrowers -
Who can apply for a Microfinance loan?
Low-income individuals, small businesses, and self-employed entrepreneurs.
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What is the interest rate for Microfinance loans?
It varies but is capped by RBI regulations to protect borrowers.
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How to start a Micro Finance Company?
Register under the Companies Act, meet capital requirements, and comply with RBI guidelines if applicable.
