Micro Finance Company Registration

65,999.00

All Inclusive Fees

 

(EMI:  12 months)*

Description

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Micro Finance Company Registration

Overview

A Micro Finance Company, also known as Micro Finance Institution is a type of non-deposit taking NBFC, other than Section 8 company which primarily deals with low amounts of financing to such people who has low income and are mostly located in rural and semi-urban areas of India. Such companies or institutions are regulated by the RBI Act, 1934.

Since banks are largely concentrating on the organized sector especially the big corporate houses who has great credit ratings. Hence, such Micro Finance Institutions are emerging as a ray of hope for the people with low and mediocre income. Micro Finance Company. They largely resist themselves from using the medium of normal banking channels. Also, the banking sector alone is not sufficient to cater to the financial needs of all sectors of the population. Hence, Micro Finance Institutions emerged as the viable option with a vision to increase its operations.Moreover, such MFI’s has less rules and regulations in comparison to normal banking channels which makes them a worthwhile business option.

Hence, Microfinance Institutions provides financial assistance such as savings, insurance, and loans to the needy group in the society and also to the small entrepreneur, who usually are not able to meet the criteria for the standard bank loan.

Apart from the capital requirement criteria, working and registration process of Micro Finance Company is quite similar to Non-Banking Financial Companies (NBFC’s)

Advantages

Some of the advantages of registering a Micro Finance Companies are as follows:

  • Easy Finance to small business and traders

One of the primary objective of Micro Finance Companies is to provide finance to the small businesses and traders. Its main focus is to build a financial system for the poor and unemployed categories to provide them loans and other financial services to expand.

  • Promotion of Socio-Economic Growth

Micro Finance Companies helps in promoting the factor of Socio-Economic Growth at the local level. It further empowers poor to avail not just loans but every kind of financial services. It tries to eliminate the poverty level in India at a large scale.

  • Better rate for repayment

Micro Finance Companies provide better rate for overall loan repayment in comparison to the traditional banks which do not provide such great rate.

  • Provides different types of loans

Hence, Microfinance Institutions provides financial assistance such as savings, insurance, and loans to the needy group in the society and also to the small entrepreneur, who usually are not able to meet the criteria for the standard bank loan.

Types of Legal Structure for registration of Microfinance Company

Following are the different types of legal structure for the registration of Micro Finance Company:

  1. NBFC-MFI

For such kind of legal structure of MFI, a registration is to be obtained from the Reserve Bank of India (RBI). The minimum net worth requirement in such structure is Rs. 5 crores, but it is Rs. 2 crores in case of the north eastern states of India.

  1. Societies

Under such kind of legal structure, registration of societies has to be done as per the Society Registration Act, 1860. The process of registration is quite easy and also there is no minimum capital requirement.

  1. Trust

Under such kind of legal structure, registration of trust has to be done as per the Indian Trust Act, 1882. The process of registration is also quite easy and there is no minimum capital requirement.

  1. Cooperative Societies

Under such kind of legal structure, registration of cooperative societies has to be done as per the Cooperative Societies Act, 2002.  The process of registration is also quite easy and there is no minimum capital requirement.

  1. Section 8

Section 8 company needs to be registered as per the Companies Act, 2013. The registration process is quite simple and no minimum capital is required.

  1. Registration of Company

The first and primary step while registering a Micro Finance Institution is to register as a company which may be either be a Private Limited Company or a Public Limited Company as per the rules and regulations of Companies Act, 2013. No minimum amount of capital is required to register it as a company.

  1. Raising of Capital

Now once your company is incorporated, you need to raise the authorized and paid up capital to Rupees five crore or rupees two crore as the case may be. Further, please note that the capital should be raised only in the form of equity share capital and not in the form of preference share capital.

  1. Bank Account Opening

Once the company is incorporated, the amount shall be deposited in the form of Fixed Deposits in an official/current bank account. Post this, a certificate of no lien needs to be obtained from the bank which must be attached or application to be submitted to the RBI (Reserve Bank of India)

  1. Application for Registration

Now, after acquiring all the certified copies and arranging all the documents which are discussed above, you are required to submit it to the Reserve Bank of India (RBI) to carry out its business affairs.

  1. Filing of online application with RBI

Now you are required to file the application online to the RBI post which you will be allotted an application reference number for your future reference.

  1. Submission of hard copy

Once an online application is filed, a hard copy of the application along with the necessary documents will be submitted with the regional office of the Reserve Bank of India. On receiving the application, RBI will conduct due diligence and after satisfaction, RBI will issue a certificate of commencement of business.

How can we help in getting registration?

  • Guidance throughout the process of registration
  • Collection of all essential documents
  • Regular updates and quality service
  • Team of well-versed professionals taking care of complete process
  • Verifying all the documents
  • Assurance of Registration within minimum time

FAQ

 

01. What does Micro Finance Company mean?

Microfinance Company refers to the Company which facilitates low income group which are distantly located especially in semi urban as well as rural areas and have no access to banking facilities by providing funds to them.

02. What are the purposes of Microfinance Company?

Microfinance Company offers funds to low income people and comes handy for those people who reside in semi urban as well as rural areas.

03. What are the purposes of Microfinance Company?

Microfinance Company offers funds to low income people and comes handy for those people who reside in semi urban as well as rural areas.

04. What are the pre-requisites for Microfinance Company Registration?

The pre- requisites for Microfinance Company Registration includes Certification of Incorporation’s copy, extract of main object clause specified in MOA’s copy is required, Fixed Deposit Receipt’s copy, Banker’s Certificate in regards to Net Owned Fund and Banker’s Report.

05. What is the maximum amount of fund that can be lent by Microfinance institution?

Upto INR 50,000 loan can be provided by Microfinance institution to people who have no access to regular banking facility.

06. Who can be benefited from Microfinance lending?

People like agriculturists, businessman, farmers and so on usually avail facilities of Microfinance Company. It is mostly availed by low income group.

07. What will be the tenure of the loan and what will be the loan repayment method?

Minimum loan tenure should not be less than 24 months. If the loan amount is more than Rs.15000 then the repayment can be made by the borrower without any penalty. MFI has to give a loan to eligible borrowers without any collateral or margin money. At least 70% of total loan amount has to be offered to borrowers by MFI for Income generation. Under this, it will be a choice of borrowers to repay the loan amount weekly or fortnight or in monthly instalments.

08.What are the restrictions regarding interest rate and loan processing charges of MFI?

Microfinance Companies are not eligible to charge a higher rate of interest from the prescribed rate of interest and maximum variation cannot exceed 4% while if we talk about loan processing charges then it cannot exceed 1% of the gross loan amount. MFI can levy loan insurance charges separately.

09. Can MFIs give loans for the personal use of borrowers?

Yes, the loan can be given for the personal purpose of the borrowers by MFI, the however aggregate amount cannot exceed 30% of the total loan.

10. Can MFIs give loans for the personal use of borrowers?

Yes, the loan can be given for the personal purpose of the borrowers by MFI, the however aggregate amount cannot exceed 30% of the total loan.

11. Can Prepayment penalty be levied by MFI?

No, prepayment penalty cannot be levied by MFI.