The Microfinance Company helps small businesses, startups, or low-income groups by providing financial services like savings, loans, and insurance to society’s needy people. Small Businesses, entrepreneurs, or startups can depend upon Microfinance companies for their business needs. In India, Microfinance institutions mainly work in remote areas, villages, and small businesses because the private sector banks and government banks cannot open their branches in India’s village. That’s why microfinance companies act as a mode of finance for small business owners. Scroll down for more information regarding Microfinance Company Registration in India.
What are the types of legal structures for Microfinance Company Registration in India?
|Particulars||NBFC-MFI||Societies and Trust||Section 8 Company||Cooperative Society|
|Govern by||As per Companies Act, 2013 with RBI||Trust Registration as per India Trust Act, 1882 and Society Registration as per Society Registration Act, 1860||Section 8 Company Registration as per Company Act, 2013||Registration as per the Cooperative Societies Act, 2002|
|Required Net Worth||Rs. 5 Cr. and Rs. 2 Cr. in case of North East States||No requirement||No requirement||No requirement|
What are the benefits of Microfinance Company Registration in India?
After the successful completion of registration, you can avail of all the benefits of Microfinance company registration in India, as mentioned below.
- It helps to promote small business entrepreneurs and start-ups.
- No need for RBI approval.
- It requires minimum compliances.
- It is the easiest way to start a finance business.
- No minimum capital is required.
- The loan repayment rate is better as compared to traditional banks.
Eligibility Criteria for Microfinance Company Registration in India
Microfinance institutions as a Section 8 Company and an NBFC have separate eligibility criteria. Check below for the same.
Microfinance Company as an NBFC:
- The requirement of approval from RBI (Reserve Bank of India).
- The minimum net worth of Rs. 5 crores.
- Directors must have minimum experience of 10 years in the field of finance.
- For a Public Limited Company – a minimum of 7 members and for a Private Limited Company- only two members are required.
- The microfinance institution must follow all the compliances of an NBFC.
Microfinance Company as a Section 8 Company:
- There is no minimum net worth
- The limit of loan for Microfinance institutes is up to Rs. 50,000, and this loan amount has to be insecure (used for small businesses).
- Only two members are required.
- Section 8 Company has to adhere to different compliances.
Documents required for Microfinance Company Registration in India
Before the Microfinance Company Registration, you need a few documents not to face any problem during the registration. Here you can check all the documents below.
- Copy of Memorandum and Articles of Association of the company.
- Obtain a copy of the “Certificate of Incorporation” of a Company.
- Obtain a copy of the educational and professional qualifications of all the proposed directors of the company.
- In the case of Indian citizens, the PAN card of all the directors and shareholders is required.
- Latest passport size photos of all the directors and shareholders of an applicant company.
- Obtain a copy of the rental agreement if you have a rented property.
- For the address proof, bring a copy of the electricity bill, telephone bill, water bill, and gas bill of directors and shareholders.
- Obtain NOC (No Objection Certificate) from the owner of the registered office.
- Income proof of the directors.
- Net worth and the latest credit reports of the directors.
- The planned structure of the organization.
- Experience letter in the financial segment of the business.
- For registered office address proof: bring a copy of the electricity bill, telephone bill, water bill, and gas bill of directors and shareholders.
- Banker’s report.
Process of Microfinance Company Registration in India as an NBFC
The following are the steps involved in the Microfinance Company registration in India through an NBFC.
Step 1: Company Registration
The first step is to form a public limited or private limited company; they can register as an NBFC microfinance company.
Step 2: Raise Capital
To raise capital, the required minimum NOF (Net Owned Funds) is of Rs. 5 Cr. For the north-east region, the requirement is Rs. 2 Cr.
Step 3: Deposit the raised capital.
After the raised capital, the next step is to deposit the bank’s capital as a fixed deposit and obtain a No Lien certificate from the bank.
Step 4: Apply for Microfinance Company Registration with RBI
For the license, the NBFC fill an online application and submit it along with all the certified documents, and then a hard copy of the application and license also submitted at the regional office of RBI. The following are the documents that must be required at the time of application:
- Memorandum and Articles of Association (MoA and AoA).
- Obtain a copy of the Incorporation of Certificate of the company.
- Copy of board resolution.
- No Lien certificate from the bank.
- Banker’s report of the company.
- Latest credit history of all the proposed directors.
- Net worth certificate of all the proposed directors.
- Highest education and professional certificate of the director.
- Income certificate and KYC of the director.
- Experience certificate of the director in the financial field.
Process of Microfinance Company Registration in India as a Section 8 Company
Following are the steps of Microfinance company registration in India as a Section 8 Company:
Step 1: Apply for DSC
The first step of registration is to apply for a Digital Signature Certificate (DSC) because the DSC is required for the online process.
Step 2: Name approval:
For name, approval fill the SPICE+ form. The name should be unique and catchy.
Step 3: Draft Memorandum of Association and Articles of Association:
After the name approval: draft the Memorandum of Association (MoA) and Articles of Association (AoA) and file it along with the necessary documents.
Step 4: To obtain a license file, all relevant documents.
File all the documents along with the incorporation certificate and Form INC-12 to obtain a license. The following are the documents for registering a company:
- PAN Card of all the proposed directors and shareholders.
- Identity proof and address proof.
- Latest passport size photos of all the directors and shareholders.
- Obtain a NOC from the owner of the property.
- Rental agreement (in case of rented office).
- Stamp duty as mandated by the state.
From the above, it is clear that the Microfinance Company helps all the small businesses or startups in India by providing some financial needs. We can also say that the microfinance companies also act as a medium to the growth of the financial market or sector.