What is Micro Finance Company Registration?

Microfinance Company is also known as a Micro Finance Institution. It is a type of Company that provides Financial Services like, Loans, Credit, Insurance, and Savings to small business entrepreneurs and small enterprises. Micro finance is a type of non – deposit accepting NBFC. It provides small financial support to people with low income and in rural and semi-urban areas. Micro Finance Companies are eligible to provide a loan or credit of up to 50,000 in a rural area and Rs. 1,25,000 in urban areas to small entrepreneurs, enterprises, and people with the low-income group. It provides loans to the small businessman, agriculturists, horticulturists, farmers, etc. without demanding any collateral security or marginal money. It can provide loansatreasonable rates prescribed by central government and Reserve Bank of India. Micro Finance Companies are a great support to rural and agricultural development and income and employment generation. 

How to Start Microfinance Company Registration? 

Microfinance company registration is divided into two broad categories:

  1. Private or Public Limited Company registration.
  2. Approval from Reserve Bank of India for starting the business of Micro Finance.

A microfinance company must have a minimum capital of Rs. 5 crores. For North east India, the minimum capital must be of Rs. 2 crores only. This amount is to be deposited in a bank account opened in the name of the company as fixed deposit.

Anyone who wants to register a Micro finance company needs to register a company first under the Companies Act, 2013. Once the company is registered and you have received certificates of incorporation under the Companies Act, 2013 you need to open a bank account in the name of the company and deposit an amount of 5 crores or 2 cores, as the case may be, as fixed deposit in the account. After depositing the amount of fixed deposit you need to make a proper application to Reserve Bank in prescribed format for NBFC – MFI, along with all the required documents. The application will be filed online and hard copies of all documents will be submitted to the regional office of Reserve Bank of India. After receiving the application and all the necessary documents the Reserve Bank of India will conduct a due diligence. If the apex bank is satisfied will the application and the documents, it will issue Certificates of commencement of business to the Micro finance company.

Checklist of Documents required to be filed with the application for MFC registration with an RBI: 

  • Certified true copy of Certificate of incorporation of businesses and Certificate of commencement of business of the concerned company.
  • Certified copy of up to date Memorandum of Association and Article of Association.
  • Certified true copy of Board Resolution in supporting the registration of the company as a micro finance company, along with a declaration that the company will comply with prescribed rules, regulation and compliances directed by Reserve Bank of India for a micro finance company.
  • Bankers’ report related to dealing made with the company.
  • An auditor’s report stating that the applicant company owns the minimum capital required.
  • Certified copies of educational and professional qualification of all directors and experience certificate in the sector of Financial Services if any.

A Micro Finance Company can charge different rate of interest from different customers, but the variation between the minimum and maximum interest rates shall not exceed 4 per cent for individual loans.