Microfinance Company

Small businesses tend to avoid borrowing from larger banks or NBFCs due to their high-interest loan terms and collateral requirements. To decrease their cost burden, SMEs need to have smaller amounts

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Basic overview
Registration Process

Microfinance Company Registration

Register your Micro Finance Company at affordable prices with our pan India company registration services. Just subscribe to our comprehensive MFI registration package, and our dedicated team is there to help you with every step.

Register your Microfinance Company

Small businesses tend to avoid borrowing from larger banks or NBFCs due to their high-interest loan terms and collateral requirements. To decrease their cost burden, SMEs need to have smaller amounts of collateral-free loans at lower interest rates. Microfinance companies are formed for this purpose. MFIs have been established to offer collateral-free credit to small-scale Indian startups. For more information on MFIs and to create one, contact us.

What is a Micro Finance Company?

A Microfinance Institution is an organization offering various financial services to low-income businesses, including credit facilities and insurance. Defines microfinance institutions as "provisions for thrift, credit and other services and products of meager amounts to the poor in rural, suburban, or urban areas to meet their particular financial needs. MFIs are established with RBI approval as non-banking finance companies. MFI was founded as a Section 8 company under the Companies Act of 2013.

Checklist to Register Microfinance Company in India

A microfinance business can be incorporated in a public or private limited partnership to establish itself as a Section 8 or NBFC. We have provided a comprehensive list below of all the conditions for your clear understanding.

Checklist to establish a Microfinance firm in India

  • Private Limited companies must have at least two members, and Public Limited companies must have 7.
  • Pvt Ltd and Section 8 require at least 2 directors. Public Limited companies need 3 directors.
  • Minimum one resident director
  • A unique and valid title
  • Capital investment limit

Checklist for setting up a Microfinance Company India

A microfinance business can be incorporated in a public or private limited company. It can then be established as an NBFC company or a Section 8. To ensure the success of the microfinance business, all members must meet the prerequisite conditions before forming it. We have listed all these conditions in detail below for your understanding.

S.No Checklist to establish a Microfinance Company in India
1. Limitations on loan disbursement are Rs.50,000 in collateral-free loans and R.1.25 lakhs in dwelling units.
2. MFI has been licensed by the MCA for operation of a Section 8 company
3. The company doesn't accept public deposits

Documents necessary for MFI Registration

The documentation is essential for filling out an application for MFI Registration in India. You do not need more documents to register an MFI for Section 8 companies. Has a complete listing of all these documents. Prior approval by the RBI is required to establish an MFI as NBFC. The following documents should be included with the prescribed form:

List of Documents

  • Memorandum of Association (Motion of Association) and Articles of Association
  • Certificate of incorporation
  • Board resolution certified true copy
  • Auditor's Certification on Net-Owned Fund
  • Banker's Certificate of No Lien for Fixed Deposit
  • Banker's report regarding the company
  • CIBIL Credit Report from the directors
  • CA Certified Net worth Certificate of Directors
  • Education Proof of Director
  • Documentation proving professional qualification of directors
  • Photo, Address, & Identity Proof of Directors
  • Income proof for the director
  • Relevant work experience in financial services
  • Plan Organization Structure

Who regulates Microfinance Companies in India?

Like all financial institutions in India, RBI or the Reserve Bank regulates microfinance.

Must I have an RBI license to establish an MFI?

A license from the RBI must be obtained for setting up an MFI to operate as an NBFC. But, the RBI must not have any approvals or licenses for MFIs registered as Section 8 companies. Only one license is required for a section-8 MFI to operate as a Section 8 Company by MCA.

Are there any restrictions on loan disbursement from Microfinance firms?

MFIs not registered as NBFCs are prohibited from disbursing loans of more than 10% of total assets. MFIs under section 8 of the Companies Act cannot disburse unsecured loans or collateral-free loans above Rs.50,000 and more than Rs.1.25 lakhs for dwelling residences.

Net assets are the assets a company currently has in its possession.

The report of the Banker in MFI NBFC provides details on the applicant's transactions with the bank as a depositing and lending entity.

STEP 1- Documentation

The application form for a license must be completed in the prescribed format. (Direct to the documentation section via the link on "here") Incomplete submission of any documents can result in the rejection of the application. To avoid this, you should arrange all necessary documents before starting the application process.

STEP 2 – Incorporate your business

MFI-NBFCs may be incorporated as a Public Limited Company or Private Limited Company. Establishing MFI-NBFCs begins with the incorporation of your company as a Public Limited Company. Dobizindia Business Solution offers affordable, wholesome, and reliable services for both private and public limited companies. For more information or to avail of our services, visit our official webpage on company incorporation India.

STEP 3 -- Ensure Capital Adequacy

An MFI NBFC must be able to raise enough capital before it applies for approval from the RBI. The RBI requires that an applicant company have a minimum capital of Rs.5 lakhs to be eligible for the necessary license. This is the amount that India's North Eastern states require.

STEP 4- Deposit Capital

Once the prescribed capital of Rs.5 Crores has been arranged, the funds should be deposited as a fixed deposit in an FD bank opened in the NBFC's name at any scheduled commercial banks. The banker must also get the No Lien Certificate.

STEP 5 -- Apply digitally for your RBI license

The official website for the RBI has the required application. The application must be downloaded and filled out manually. After filling out the application, you must submit it electronically. An application reference number will be generated upon successful submission.

STEP 6 -- Submit the RBI regional application

After the application has already been submitted digitally to the RBI, a copy of that application along with the application number and copies of all required documents must also be submitted to the Regional Office of RBI. The relevant authorities will then review the application and, upon verification, submit it to the Central Office of the RBI.

STEP 7- Issuance of an RBI license

The RBI issues the license to applicant companies within days of filing the application. After receiving the license, the NBFC can start operating as a Microfinance Company without difficulties.

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