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Microfinance Company Registration

Register your Microfinance Company online
(25-30 days)

Micro Finance Registration

Name(Required)

Procedure For Microfinance Company

Step 1
NAME APPROVAL APPLICATION

We will verify the information you provided before applying for name approval.

 

Step 2
DSC (DIGITAL SIGNATURE)

We will provide you a DSC and DPIN after your documents have been received.

 

Step 3
APPLY FOR DIN

Existing Directors of Incorporated Companies are granted a unique number called a "Director Identification Number."

 

Step 4
CERTIFICATE OF INCORPORATION

With CIN, PAN, & TAN, a file for an incorporation certificate will be created.

 

Step 5
PAN AND TAN APPLICATION

Apply for your PAN and TAN since you'll need these to open a bank account.

 

What is a Micro Finance Company?

The financial institutions known as microfinance companies mostly offer small-scale financial services in the form of loans, credit, or deposits. Due to banks' complicated lending procedures, these organisations are experienced in facilitating the credit framework for independent businesses. It is typically referred to as a Micro-credit association in this fashion. They offer small loans to a variety of households or small businesses that don't use or qualify for traditional banking channels or financial services. They offer microloans of up to Rs. 1,25,000 in urban areas and up to Rs. 50,000 in rural regions. The simplest way to form a Micro Finance Company in India is through the Section-8 Company with the Ministry of Corporate Affairs without requiring any additional fees for money or security. It is capable of providing credit at fair interest rates under RBI and federal government control. They are a huge asset to the growth of the entire nation and of agriculture, including the generation of money and jobs. In India, there are essentially two types of microfinance organisations that are allowed: one that must be registered with the RBI and the other that is non-benefit and is classified as a section 8 company without requiring RBI permission.

Documents Required For Company Registration

  • PAN card: The shareholder and director PAN cards in the case of Indian citizens.
  • Passport-size image: A recent photo of the directors and shareholders that is no older than 10 months.
  • 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 the 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

What is Included In Our Package?

DIN for 2 Partners

Digital Signature For 2 Directors

Name search & approval

MOA/AOA

Registration Fees

Company Pan Card

How to register the micro-finance Companies in India?

Section 8 Companies in India can enrol in the microfinance. No base capital is necessary for Section 8. Here is how it works:

Prepare DSC & file for Name Approval:

Applying DSC and DIN is the first step. This allots time for one to two days. It is used to create the online structures that are submitted to the ROC for company incorporation. DSC is not applicable to physical documents. DSC is required for incorporation because the Company Registration process is entirely online. After that, you must submit a name approval request. The Central Registration Centre (CRC) shall produce Name Applications under RUN. The Name Approval is subject to final review by the CRC, and either approval or rejection must be communicated to the Applicant by email from that point on. The last two letters of the name must be one of a type, such as establishments, Sanstha, etc. Additionally, a maximum of 6 names can be filed at one time.

Apply for DIN:

Existing Directors of incorporated companies are given a unique number called a Director Identification Number, or DIN. The Central Government assigns this recognisable number to any applicant for a directorship or existing director of a company. Once Got DIN Number, the Director can apply the equivalent forever life irrespective of the company he/she works in. In the unlikely event that you switch organisations, the DIN Number remains the same.

Certification of Incorporation:

The joining must be stored with each and every important document in the third phase. All necessary attachments, including the MOA, AOA, declarations, and others, are attached to the form. The CIN, PAN, and TAN numbers on the incorporation certificate are required. Due to the fact that stamp duty is a state matter, the organisation must pay it regardless of capital. You can start your Indian microfinance company once the organisation has been consolidated. But please keep in mind that section 8 prohibits you from making any deposits. After that, apply right away for your PAN and TAN because you'll need these to open a bank account.

Why to register for Microfinance company?

Following are a few examples of how micro-finance companies operate:

Promoting socio-economic growth:

The microfinance institution will support socioeconomic development at the local level. allowing self-improvement groups and supporting their controllable growth are also important. The neediness component must be removed since the poor will need more than just credit; they will also need a variety of other financial services.

No RBI Approval:

Registration is quick and easy because you don't need the RBI's approval to register as a non-profit organisation. Even the minimal capital requirement of Rs. 2 crores is not necessary.

Provide a way to funding:

Comparatively speaking to traditional financial instruments, it offers a higher overall loan repayment rate. Additionally, which will assist in fulfilling the population's need for credit, are housing, company loans, working capital loans, emergency loans, and consumer loans.

Offers reasonable services for small businesses:

It focuses on creating a financial system for the underprivileged and unemployed and seeks to establish long-lasting local financial institutions that work to draw domestic deposits, recycle them into loans, and provide other financial services.

Minimum Compliances:

Even if the corporation is unable to register with the reserve bank, it is expected that it will adhere to the RBI requirements. In any instance, RBI's approval is not necessary. The same procedures used by other businesses are used by Section 8 corporations to comply with the corporations Act. That's it.

Micro-credit loans under Micro Finance Company

Microfinance company loans are not very difficult to obtain. The majority of unsecured loans are granted and subject to weekly or monthly repayments. Interest rates between 20 and 26% are often charged. Along with the accompanying focuses, the following other points are also important:

  • The difference in interest rates that an NBFC can impose on its consumers shall not exceed 4%.
  • The loan's interest will be calculated using a declining balance technique.
  • Every workplace or piece of literature should mention microfinance providers and their workable interest rates.
  • Every person must receive a loan card from a company that details the interest rate and any special terms and conditions.
  • Self-improvement groups (SHG) and connection programmes both offer loans as well.
  • Even though provisioning standards do not apply to section 8 companies, the equivalent must be classified as a non-performing resource if payment is not received within 90 days.

Advantages of Micro Finance Company

No minimum capital of 5 Cr

No RBI approval

Easiest way to start finance business

Can charge up to 26% rate of interest.

NO RBI APPROVAL

In India, the RBI is in charge of and specifically endorses NBFCs (Non-Banking Finance Companies). However, the Reserve Bank of India (RBI) has granted some corporate structures permission to engage in banking activities only until a predefined point of collapse.
Sections 45-IA, 45-IB, and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934) must not apply to any substantial financial business that is participating in the following activities, according to Paragraph 2(iii):

(a) Performed microfinance activities, extending credit for a business initiative of no more than Rs. 50,000. Additionally, every needy person would receive Rs. 1,25,000 to cover the cost of a housing unit in order to help him improve his standard of living and level of income.
(b) Licenced in accordance with Section 8 of the 2013 Companies Act
(c) Refusing to take public deposits as per Notification No. 118 /DG (SPT)-98's paragraph 2(1)(xii) from January 31, 1998.

Mandatory Requirements for Micro Finance Company

The Micro Finance Institution (MFI) can be registered using one of two common procedures. The initial step is to establish a corporation and request RBI approval. A Microfinance Company must have active investor profiles and a net owned fund of at least Rs. 5 crore. The second step entails creating a section 8 business.

The second way of enrolment is offered by Sahyog. Applying for licences from the central government has the following benefits:

  • For commercial purposes, up to Rs. 50,000 may be granted, and for residential purposes, up to Rs. 125,000.
  • No minimum required for net owned funds. You are free to choose.
  • Since the RBI has exempted this firm from registration and several other requirements, no RBI approval is needed.

Acceptance of Deposits under Micro Finance Company

Section 8 companies prohibit the acknowledgment of deposits. Additionally, the organisation must offer its resources in order to launch your microlending business. The organisation may also raise money through gift-giving techniques. Even if you intend to register an NBFC firm and are prepared to put Rs. 5 crore into the business, extra deposits cannot be accepted at that time. To obtain deposit-taking status from the Reserve Bank of India (RBI), you must first enrol an NBFC non-deposit-taking firm, in accordance with the RBI protocol.
Since deposits cannot be received under Section 8 companies, it was advised that if you were considering registering your own NBFC, you should first start with a Microfinance Company. This would allow you to test your talents. The business must also invest its funds and launch your microlending business. The business may additionally raise money through donations.
Deposits are not allowed to be taken, even if you plan to create an NBFC firm and are prepared to spend Rs. 5 crore into the business. In accordance with RBI protocol, you must first register an NBFC non-deposit taking firm before applying to the RBI for deposit taking status. In order to test your talents, start with a microfinance organisation before moving on if you're considering starting your own NBFC.

  • For commercial purposes, up to Rs. 50,000 may be granted, and for residential purposes, up to Rs. 125,000.
  • No minimum required for net owned funds. You are free to choose.
  • Since the RBI has exempted this firm from registration and several other requirements, no RBI approval is needed.

Type of Legal Structure for Microfinance Company Registration

Particulars NBFC-MFI Societies and Trust Section 8 Company Cooperative Society
Govern by
As per the 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

The Micro Finance Company must adhere to certain minimum requirements, however the following requirements are the most crucial:

RBI Compliance:

Even if the company is exempt from reserve bank registration requirements, it is still obligated to abide by all RBI regulations.

Meaningful:

Your Section 8 Company's name should reflect the main goals of the organisation as outlined in its "MoA." For illustration, "Aware Health and Research Foundation" and "Nagarjuna Agricultural Research and Development Institute" are examples of Section 8 Companies. Additionally, the task they do is indicated by their names. This promotes goodwill and branding.

Company Act:

Similar to other corporations, Section 8 firms must adhere to the corporations Act.

Additional:

If we're talking about the requirements for compliance, other regulations like the PMLA must also be observed.

Frequently Asked Questions

What is a microfinance company?

Microcredit is another name for microfinance. It is a financial service that offers loans, savings accounts, and insurance to business owners and entrepreneurs who lack access to more conventional funding sources like banks or investors.

How can a microfinance organisation register?

Follow these steps to register a microfinance company:
Application for File Name Approval, first
2) Apply for a DIN and DSC
3) Certificate of Incorporation,
4) Application for PAN and TAN

What paperwork is needed to register microfinance organisations?

-Copy of PAN Card -Aadhar Card -Address Proof (Bank Statement, Mobile Bill, Telephone Bill), -Passport Size Photo -Ownership Proof (Electricity bill etc) -Utility Bill (Gas bill, Electricity bill) -NOC(Download format)
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?

What advantages come with registering a microfinance business?

It helps promote independence and enterprise. - Consistent and easy financial access. -A high total loan repayment rate compared to traditional banks

What is the Microfinance Company's registration fee?

Microfinance Company registration costs begin at Rs. 1,190,000/-.

Can borrowers receive loans from microfinance organisations for their own personal use?

Yes, microfinance organisations may offer loans to borrowers for personal use, however the total amount cannot be greater than 30% of the entire loan.

Do microfinance firms enforce the prepayment penalty?

No, microfinance organisations are not permitted to charge the prepayment penalty.

What are the microfinance organisations' restrictions on interest rates and loan processing fees?

When it comes to interest rates, Microfinance Companies are not allowed to go above the directed rate of interest, and most variations cannot exceed 4%. If we are talking about loan processing fees, they are also not allowed to go above 1% of the gross loan amount. Loan insurance fees may be assessed by individual microfinance organisations.

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