Microfinance Company Registration

– Register your Microfinance Company online
– Starting At Rs.1,90,000-/ (inclusive all taxes & fees)..!!!
– Section 8 Microfinance without RBI approval,
– SAVE 50% COST…!!!
(Takes 25 to 30 Days)

Micro Finance Registration

What is a Micro Finance Company?

A microfinance company is basically a type of financial institution which provides small-scale financial services in the form of loan, credit or savings. These companies are introduced to ease the credit system for small businesses as they don’t get a loan from banks due to their complex process. Therefore it is commonly named as a Micro-credit organization. They offer small loans to various small businesses or households that do not have access to formal banking channels or are not eligible for loans. They provide small loans amounting to less than Rs.50,000 in amount to people who reside in rural areas and for the people who reside in urban areas, the loan amount limit is Rs.1,25,000. The simplest way to register a Micro Finance Company in India is to register a Section-8 Company with MCA (Ministry of Corporate Affairs), without the charge of any kind of marginal money or guarantee security. A microfinance company can give loans at inexpensive rates directed by the RBI and central government. They provide huge support to all the rural and agricultural development including the creation of both income and employment. There are basically 2 types of microfinance companies that are allowed in India, the former type has to be registered with the RBI and the latter is the non-profit type, which is registered as a section 8 company and does not need RBI approval.

How to register the micro-finance Companies in India?

A microfinance company can be registered in India in the form of a Section 8 company, as a Section 8 company does not need any minimum capital. Here is the process:

Prepare DSC & file for Name Approval:

The first step is to apply for both “DSC and DIN”. This takes 1-2 days. It is used for signing the online forms, which are filed with the ROC for the purpose of Incorporation Of the Company. A “DSC” cannot be used in Physical Documents. The Company Registration procedure is completely online and so it requires a DSC for the incorporation procedure. Thereafter, you are required to file for name approval. Name Applications under RUN will be processed by the Central Registration Centre (CRC). The Name Approval is subject to complete check by the CRC and thereafter Approval or Rejection will be communicated by E-Mail to the Applicant. The name should be unique and must end with words like foundation, Sanstha, etc. Moreover, a maximum of 6 names can be filed at one time.

Apply for DIN:

Director Identification Number is a Unique Number that is given to Existing Directors of the Incorporated Companies. This identification number is given by the Central Government to any Individual, who is going to be appointed as a Director or to any Existing Director of a Company. Once the DIN Number has been received, the Director can apply the same for life irrespective of the company he/she works in. If you change the company it doesn’t change the DIN Number.

Certification of Incorporation:

The third step is to file for the “Certificate of Incorporation” along with all the necessary papers. The form is joined with all the necessary attachments like MOA, AOA, declarations, etc. The company has to pay the Stamp Duty Irrespective of the capital amount as the “Stamp Duty” is a state subject. Once the company is incorporated, you can start the microfinance business in India. But, please remember that you cannot take any deposit under section 8. After that immediately apply for PAN And TAN as both are required to open A Bank Account.

Mandatory Requirements for Micro Finance Company

There are essentially 2 ways to register for a Micro Finance Institution (MFI). One way is to form a company and then apply to RBI for approval. The minimum requirements for a “Microfinance company” are Rs.5 crore net owned fund and active profiles of promoters. The second way is to register as a section 8 company. KBTM Consultants offers the second way of registration. Apply for central government licenses features of which are as follows:

An amount of Rs.50,000 can be given for business purposes and Rs.1,25,000 for household dwelling.
No least net owned fund requirement. You can choose on your own
No RBI approval is needed since RBI has exempted this company from registration..

NO RBI APPROVAL

In India, finance businesses are approved only to Non-Banking Finance Companies (NBFC). However, some business forms have been granted an exemption by the Reserve Bank of India (RBI) to do banking activities up to a specified limit. The RBI by it’s master circular: RBI/2015-16/15 DNBR (PD) CC.No.052/03.10.119/2015-16 Dated July 01, 2015, has released all the Section 8 Companies involved in microfinance activities and are exempt from the provisions of RBI Act, 1934

As per Para 2 (iii), Sections 45-IA, 45-IB, and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934) shall not apply to any non-banking financial company which is
(a) Engaged in micro financing activities, providing credit not exceeding Rs.50,000 for a business enterprise and Rs.1,25,000 for meeting the cost of a dwelling unit to any poor person for enabling him to raise his level of income and standard of living; and
(b) Licensed under Section 25 of the Companies Act, 1956; and
(c) Not accepting public deposits as defined in paragraph 2(1) (xii) of Notification No. 118 /DG (SPT)-98 dated January 31, 1998.

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

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.

Why to register for Microfinance company?

Some of the working mechanisms of a micro-finance companies are as follow:

Promoting socio-economic growth: At the community level, the microfinance company will promote socio+ecomic growth. Also, empowering self-help groups along with facilitating sustainable development by them. A variety of other financial services will be required by the poor and not just loans; hence, it is a powerful tool to eliminate the poverty factor.
No RBI Approval: No long procedures and easy to register as there is no RBI approval required when you register as a non-profit company. Even, there is no need for minimum capital of Rs.2 Crores.
Provide a way to funding:It gives a better overall loan repayment rate than traditional banking products. Further, which will help in meeting credit needs for such a population range.
Offers reasonable services for small businesses: It focuses on building a financial system for the poor and unemployed and aims to make permanent local financial institutions that try to attract domestic deposits, recycle them into loans, and give other financial services.
Minimum Compliances:Company is expected to comply with RBI standards even if it is not required to register with the reserve bank. But no approval from RBI is needed. A Section 8 company will comply with Companies Act the same way as other companies do. That’s all!

Procedure For Microfinance Company

NAME APPROVAL APPLICATION

Details given by you will be checked and then we will apply for name approval.

DSC (DIGITAL SIGNATURE)

After submitting your documents we will give you DSC and DPIN.

APPLY FOR DIN

Director Identification Number is a Unique Number that is given to Existing Directors of Incorporated Companies.

CERTIFICATE OF INCORPORATION

File for Incorporation Certificate will be done with CIN, PAN & TAN.

PAN AND TAN APPLICATION

Apply for PAN & TAN as they will be needed for opening a bank account.

Documents Required

PAN card: In the case of Indian citizens, the PAN card of shareholders and directors.
Passport size photograph: Not more than 10 months old photograph of directors and shareholders.
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 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

Interest Rates on loans

There are usually 3 types of charges that can be imposed by a Micro Finance Company (MFI)

Interest Charge:

The average interest rate must not exceed 26%.

Processing charge:

The processing charge should not be more than 1% of the gross loan amount.

Insurance premium:

Only the actual cost of insurance for group, life, health, etc to be charged and no extra charge is permitted as per RBI policy.

Calculation of Interest Rate for Micro Finance

The rates of interest charged by Micro Finance Companies must be less of the following:

Cost of funds plus 12% margin or
Average base rate multiplied by 2.75.

Acceptance of Deposits under Micro Finance Company

Deposits are not permitted to be accepted under a section 8 company. Moreover, the company has to invest it’s funds and start it’s operations. Further, the company may also raise funding by way of donations.

Even if you are intending to register as an NBFC company and are ready to invest Rs.5 Crores into the business, then also deposits are not permitted to be taken. As per the RBI procedure, first, you are required to register as an NBFC non-deposit-taking company and then consequently apply for a deposit-taking status from the Reserve Bank of India (RBI).

Hence, it is advised if you are thinking to register your own NBFC, first start with a “microfinance company”, test your skills and then move forward.

Micro-credit loans under Micro Finance Company

Loans under microfinance companies are not very complicated. Most unsecured loans are given and are against monthly repayments or weekly repayments. Interest is charged often in the range of 20 -26%. Besides the following points are also important:

An NBFC can impose a differential rate of interest to it’s customers but the change must not be more than 4%.
The interest on the loan to be charged on decreasing balance method.
Microfinance companies have to show in all the offices or literature, the effective rate of interest.
Companies must issue a loan card to all the members saying the interest rate, all different terms & conditions.
Loans are also provided in self-help groups (SHG) and other link programs.
If no repayment is received within 90 days, then the same must be treated as a non-performing asset, though, provisioning norms do not apply to a section 8 company.

Type of Legal Structure for Microfinance Company Registration

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

There are minimum compliances which are to be met by the Micro Finance Company. However, the most important compliances are as follows:

RBI Compliance:

The company is expected to comply with the RBI norms even if it is not required to register with it.

Company Act:

A Section 8 company is also required to comply with the Companies Act,2013, in the same way, other companies do.

Additional:

There are other laws as well which are to be taken care of like PMLA etc and other mandatory compliances are also to be met with.