Microfinance Company Registration
Microfinance Organizations provide financial services such as loans, savings, and insurance to needy people of the society and small business entrepreneurs. They will not be able to qualify for a standard bank loan.
What are the features of Microfinance Company Registration?
The following key features of Microfinance Institutions:-
- Microfinance Organizations must be incorporated as per the Companies Act 2013.
- Before starting the firm, they must have a minimum net worth as prescribed by the relevant authority.
- They should have the required license or authorization.
What are the advantages of Microfinance Company Registration?
The Reserve Bank of India has formed a framework to provide essential legitimacy to the sector. The following are the advantages of Microfinance Institutions:-
- It helps in boosting self-sufficiency and private enterprise;
- Smooth access to finance;
- In comparison to traditional banks, better overall loan repayment rate.
- It helps in consolidating the financial condition by meeting the credit needs of needy people by giving different types of loans such as emergency loans, business loans, working capital loans, housing loans, etc.
What are Microfinance Institutions?
Microfinance Institutions are a non-deposit taking NBFC which performs banking at a small level as a bank does. MFI occur at a minimal level if compared to NBFC. Microfinance institutions provides similar lending services as NBFC to the poor and weaker sections of the society who do not have admission to regular banking services.
What are the Requirements for Microfinance Company Registration?
For Microfinance Company Registration in India, there is a prerequisite of minimum paid-up capital of INR 5 crores. While in the case of the North-East region of India, the minimum paid-up share capital requirement is INR 2 Crore only. MFIs have to maintain 85% of qualifying possessions all the time. MFI has to stand by the guidelines issued by RBI for NBFCs in general with the terms & conditions of finances.
No company is allowed to carry the activities of Microfinance Company without obtaining the prior approval of RBI.
What is the Process for Microfinance Company Registration in India?
Company Registration
The first step is to register a company either one as Private or Public Limited Company under Companies Act, 2013. At first, the company can be incorporated with the capital of INR.1,25,000.
Raise paid-up share capital
Raise paid-up share capital up to INR 5 Crore or INR 2 Crore. It must be raised up in the form of Equity Share Capital.
Bank Account Opening
After registration of the business, the amount received should be deposited in a bank account as Fixed Deposits. A certificate shall be obtained from the bank. This certificate shall be attached to an application that will be given with the Reserve Bank of India.
Application for incorporation with Reserve Bank of India
The next step is to get all the certified copies and submit them with the Reserve Bank of India for carrying business Operations. Following are required-
- Copy of Certificate of Registration
- Copy of an abstract of the main objecive clause in MoA.
- Copy of fixed deposit receipt.
- Bankers Certificate of no lien about NoF;
- Report of bankers
File Online Application
An online application will be filed with the RBI for Microfinance Company Registration. After filing of an application, the company will get the CARN
Submission of Hard Copy
A hard copy of the form along with the essential official papers has to be submitted with the regional office of the RBI. On receiving the application, Reserve Bank of India will conduct due diligence, and after satisfaction, RBI will issue a certificate of commencement of business.
What are the Documents Required for Microfinance Company Registration?
Documents required from Directors and Shareholders are-
- Appropriately certified copy of Certificate of Registration of a business;
- Qualified copy of Memorandum of Association and Articles of Association of the Company
- Board Resolution
- Banker’s Report
- Auditors report concerning receipt of the minimum net owned fund (NOF)
- A qualified copy of the highest educational and professional qualification of all the proposed directors.
Why is Microfinancing Essential?
Microfinance covers the way for small scale businesses by providing them funds and admission to capital. It makes them economically capable of refining their lives. It provides loans to the fiscally unworthy such as those who cannot get checking accounts, lines of credit, or loans from banks.
Lack of the existence of microfinance companies, the groups are vulnerable and have an alternative to using loans with high rate of interest or may even borrow money relatives. Microfinance gives them an opportunity which they can utilize by investing in their business and as a result invest in themselves.
What are the Significant Features of Microfinance Institutions?
- They must have the minimum net worth as labeled;
- They must have established the bessential license;
- They are included in the low quantity of supporting to the needy frames of society;
- Offer banking assistance at small monetary sums;
- To provide monetary support to individuals who work in diverse trades;
- Offer monetary support to small enterprises that cannot pay for any indemnities;
- Increase the contribution of women in producing ecological living;
- Deliver access to excellence healthcare;
- Improve and supplement the mode of maintenance for low-income individuals and building opportunities for self-employment
What are the Mandatory Circumstances for Micro Finance Company registration?
There are principally two ways for Microfinance Company Registration. One way is to form a company and then apply to Reserve Bank of India for support. The least requirements for Microfinance Company Registration is INR 5 crore net owned fund.
What do you understand by Non – Approval of Micro Finance Company registration from RBI?
In India, finance institutions are authorized only by Non-Banking Finance Company (NBFC) and regulated by RBI. But, some business forms have been granted immunity by the ‘Reserve Bank of India’ (RBI) to do banking activities up to a specified limit. The RBI has published all Section 8 Companies to be involved in microfinance activities.
How to receive securities under Microfinance Company Registration?
Payments are not accepted under section 8 company. Additionally, the business has to advance its resources and start microfinance company. Furthermore, the company may also raise funds utilizing donations.
if you want to register an NBFC company and invest INR 5 Crore into the business, then also securities are not permitted to be exercised. As per the RBI scheme, first, you expect to register an NBFC non-deposit-taking company and, consequently, demand for deposit-taking status from the Reserve Bank of India.
