Introduction to Microfinance Company Registration

Registering a Microfinance Company

The process of microfinance company registration can be broadly categorized into two main sections:

1. Incorporation of a new public limited company.

2. obtaining permission from the Reserve Bank of India (RBI) to operate as a microfinance company.

Section 8 microfinance company registrations, also known as microfinance institutions (MFIs), are financial entities that provide small-scale financial services such as savings, loans, and credit. These institutions play a crucial role in offering financial assistance to individuals with low incomes, particularly in rural and semi-urban areas.

Section 8 microfinance company registrations typically operate as non-deposit-taking non-banking financial companies (NBFCs). To initiate the NBFC registration process, you can explore our website, Legalraasta.

These companies extend small loans or credits, ranging from approximately Rs. 50,000 in rural areas to Rs. 1,25,000 in urban areas, to individuals belonging to low-income groups and small entrepreneurs. These loans are provided without requiring collateral or guarantors and are offered at affordable interest rates set by the RBI and the central government. Microfinance institutions contribute significantly to rural and agricultural development, as well as income and employment generation.

Steps for Microfinance Company Registration:

1. Company Registration:

• Register a new company under the Companies Act, 2013.
• Obtain the certificate of incorporation under the Companies Act, 2013.

2. Bank Account and Fixed Deposit:

• Open a bank account in the name of the company.
• Deposit a fixed amount of Rs. 2–5 crores as a fixed deposit in the account.

3. Application to RBI:

• Prepare and submit an application to the RBI in the prescribed format for NBFC-MFI registration, along with all necessary documents.
• Submit both online and hard copies of the application to the regional RBI office.

Privileges of Microfinance Company Registration:

• Facilitates self-reliance and entrepreneurship.
• Provides consistent and seamless access to funding.
• Exhibits a higher overall loan repayment rate compared to traditional banks.
• It helps improve the financial situation by meeting the credit needs of underserved populations, thereby contributing to significant economic benefits even amidst stagnant income levels.

Top microfinance companies registered in India:

1. Grameen Financial Services Pvt Ltd (GFSPL)
2. Casper Micro Credit (CMC)
3. Bhartiya Samruddhi Finance Limited (BSFL)
4. Asmitha Microfin Ltd (AML)
5. Spandana Sphoorty Financial Ltd (SSFL)
6. Share Microfin Limited (SML)
7. SKS Microfinance Ltd (SKSMPL)

Procedure for Microfinance Company Registration in India:

1. Register a company.

2. Raise authorized and paid-up capital to Rs. 2 crore.

3. Deposit Rs. 2 crore in a fixed deposit and obtain a certificate of no charge from the bank.

4. Compile all necessary documents and fulfill the RBI's checklist for registration.

5. Fill out the online application for NBFC-MFI registration.

6. Submit the hard copy of the application along with the required documents to the regional RBI office.

Documents Required for Microfinance Company Registration:

• Auditors report on the least-net-owned fund of the candidate company.
• Banker’s Report.
• CA certificate detailing group companies and investments in other NBFCs.
• Board resolution for microfinance company registration.
• Certified copies of the educational and professional qualifications of all proposed directors.
• Certified copies of the Certificate of Incorporation, MOA, and AOA of the company.

Procedure for Microfinance Company Registration in India:

Registering a microfinance company in India involves a streamlined process primarily centered around obtaining the necessary licenses and certificates from the Reserve Bank of India (RBI). Given RBI's involvement, the registration process typically spans about a month. Let's delve into the procedure:

Step 1: Company Registration Begin by registering your microfinance institution (MFI) as either a public limited company or a private limited company in India. Initially, the company can be established with a minimum capital of Rs. 1 lakh.

Step 2: Increase Authorized and Paid-up Capital to Rs. 2 Crores To meet the regulatory requirements for registering a non-banking financial company (NBFC) in India, it's essential to enhance the share capital to Rs. 2 crores, both in terms of authorized and paid-up capital.

Step 3: Deposit Rs. 2 Crores in a fixed deposit and Obtain Certificate Following the capital enhancement, deposit the sum of Rs. 2 crore into a fixed deposit account and obtain a certificate of no encumbrance from the bank. This certificate will be included in the application submitted to the RBI.

Step 4: Gather Required Documents and Fulfill RBI Checklist Compile all necessary documents and fulfill the checklist requirements for RBI registration. The prerequisites for Section 8 microfinance company registration include:

• Board resolution copy
• Certified copies of Certificate of Registration
• Memorandum of Association (MOA) relating to financial business
• Banker's report for the applicant company and associated entities
• Copy of Fixed Deposit receipt and banker's certificate showing balances in support of net-owned funds (NOF)

Step 5: Complete online application Fill out the online application for NBFC registration as a microfinance institution. Upon successful registration, the company will be issued a Company Application Reference Number.

Step 6: Submit hard copy to RBI Regional Office After filing the online application, submit a hard copy of the application along with all essential documents to the regional office of the RBI.

For Any Further query or legal help kindly call or whatsapp at 9828–1234–89 or visit at www.vakilkaro.com

Read More:-

The New Guidelines of RBI on Section 8 Microfinance Companies

Section 8 Microfinance Company: Document, Online Process and Cost