Micro-Finance Companies may be registered as Section 8 Companies subject to RBI approval for microfinance activities in India. We advise and assist in setting up the Micro Finance Company anywhere in India.
We are a professional consulting firm specialising in company registration, taxation, accounting, payroll, compliance, and intellectual property rights (IPR) services to assist new and existing businesses in India. We provide our professional services at a reasonable fee, explaining the eligibility, process, and documents required for setting up and maintaining a business. We also prepare and file necessary applications with relevant government agencies such as the Registrar of Companies (ROC) and the Income Tax Department. We do not directly provide government documents or represent ourselves as a government agency.
A Microfinance institution is an organization that offers a range of financial services to low income businesses, including credit facilities, deposit, and insurance services. NABARD defines a micro finance institution as “provision of thrift, credit, and other financial services and products of very small amounts to the low income businesses in rural, semi-urban and urban areas in order to meet their specific financial needs.” Only Non-banking Finance Companies can be set up as Micro Finance Companies, with the prior approval of the Reserve Bank of India.
A microfinance company can be incorporated as a public or private limited company, for getting established either as an NBFC in India. Therefore, before beginning the process of its formation, the members must ensure that the necessary prerequisite conditions have been fulfilled. We have provided an elaborate list of all such conditions below, for your precise understanding.
At least two members for Private Limited and 7 for Public Limited company
At least 2 directors for Pvt Ltd and Section 8, while 3 for Public Limited company
At least one resident director
A unique and valid name
Certain amount of capital
To set up an MFI as an NBFC you are mandatorily required to obtain the approval of the RBI. We have discussed the step by step procedure of setting up a microfinance company as an NBFC in India.
To obtain a license from the RBI, an application needs to be filed in the prescribed format, along with a number of documents, as listed below. A failure to produce any of these documents during the time of application can lead to the complete rejection of the application. To avoid such a situation, it is advised that all the documents required to be filed must be arranged before beginning the application process.
An MFI-NBFC can either be incorporated as a Public or a Private Limited Company. So, the process of setting up MFI-NBFC begins with the incorporation of your organization as a Public or Private Limited Company, whichever best suits its needs. Here, at Setindiabiz, we provide services of private and public limited company incorporation through our wholesome and reasonably priced packages. To know more and avail our services, you can visit our official page on company registration in India.
An MFI-NBFC must have adequate capital before it files the application to obtain the approval of the RBI. The prescribed capital limit or the net owned funds for the same is Rs.5 crores, which means that the applicant company must have a minimum capital of Rs.5 crores before it applies for the necessary license from the RBI. Note that, this amount is Rs.2 crores for North Eastern states in India.
After the prescribed capital of Rs.5 crores is arranged, the same should be deposited as fixed deposit in an FD account opened in the name of the NBFC in any scheduled commercial bank. Also, a No Lien Certificate must be obtained by the banker.
The application prescribed for obtaining RBI license is available on the official website of the RBI. The application must be downloaded and must be filled out manually. After filling it out, you are required to submit the application by uploading its scanned copy along with the scanned copy of the required documents. Following a successful submission, an application reference number is generated.
After the application has been submitted digitally, a copy of the application, the application reference number, and the copies of the required documents must be submitted to the Regional Office of the RBI. The concerned authorities then examine the application, and upon successful verification, send the same to the Central Office of the RBI.
With a few days of filing the application to obtain a license from the RBI, the RBI issues the license to the applicant company. After receiving the license, the NBFC can begin operating as a microfinance company without any hassle or hindrance.
Documentation is the most significant aspect of filling the application for MFI registration in India. To set up an MFI as an NBFC, a prior approval of the RBI is needed, for which the following documents must be filed with the prescribed application:
| S.No | List of Documents For MFI Registration as NBFC |
|---|---|
| 1. | Memorandum of Association and Articles of Association |
| 2. | Certificate of Incorporation of the company |
| 3. | Certified True Copy of Board resolution |
| 4. | Auditor’s Certificate on Net Owned Fund |
| 5. | Banker’s Certificate of No Lien on Fixed Deposit |
| 6. | Banker’s report about the company |
| 7. | CIBIL Credit Report of the directors |
| 8. | CA Certifed Net worth certificate of the directors |
| 9. | Education Proof of the Director |
| 10. | Directors Professional Qualification Proof |
| 11. | Photo, Identity & Address Proof of Directors |
| 12. | Income Proof of the director |
| 13. | Relevant work experience in the financial sector |
| 14. | Organization Structure Plan |
