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How to Register a Micro Finance Company in India

The procedure for a micro finance company registration in India may broadly be divided into two phases or stages. The first stage covers proper registration of new public limited company, and the final stage is of acquiring proper approval of the Reserve Bank of India for starting its business operations as a micro-finance company.

The paragraphs/points provided below give exclusive information about how to register a micro finance company in india, to help the interested professionals or companies. Here now, pertinent is to provide a brief introduction to the micro-finance companies, their roles and liabilities, and importance of these micro-finance companies/institutions for rural development. A Micro-Finance Company or Institution (MFC or MFI) is the type of non-deposit taking Non-Banking Financial Company (NBFC) which deals exclusively with low amounts of loans (up to INR 50,000) to individuals with low incomes residing in rural or semi-urban regions of the country, where the regular banking facilities are not easily accessible. The usual clients of these MFCs are farmers, small businessmen, agriculturists, etc. These micro financing institutions offer loans without demanding any marginal money or collateral, and take only the prescribed rates of interest. Moreover, these micro-finance companies give many welcome and lavish facilities to the borrowers regarding repayment.

Now, the following tasks/processes elucidate how to start a small finance company in India in the desired rural or semi-urban region of the country:

  • Registration of a new public limited company for the purpose, as per the Companies Act, 2013.
  • After the incorporation, the public limited company must have a minimum Net Owned Funds (NOF) of INR 5 (Five) Crore in form of the Equity Share Capital, and not the preference share capital. For the North-East India, this NOF has been kept at INR 2 Crore only. Getting Auditor's Report regarding ready availability of the NOF, and all previous monetary transactions made by the applicant company or its subsidiaries in previous years, including investments in any NBFCs.
  • Taking a Board Resolution in favor of micro financing by the company, following all rules and regulations prescribed by the RBI and Central Govt of India.
  • Opening a new Bank Account for depositing the recommended NOF, free from all aliens. Obtaining Banker's Report regarding the financial transactions made by the applicant company or its subsidiaries prior to making an application for its registration as a MFC.
  • Filing application with the RBI in the prescribed Form for NBFC-MFI, together with submitting the prescribed documents.
  • On receipt of the application and documents, RBI will conduct examination/verification and necessary due diligence. If all requirements stipulated under the RBI Act of 1934 are satisfied by the applicant company, then, RBI will issue the Certificate of Commencement of Business as a micro-finance company.
To know more about registering a micro-finance company in India, or receive our well-informed, expert, and efficient legal services for this, interested professionals/companies may readily call over: +91-8800-100-284; or send their queries or request at: