Let us learn everything there is to know about microfinance, including how to register it and how to conduct business legally in India.
Establishing a Microfinance Business:
Microfinance companies in India work as a cluster of banking services to help low-income people manage their financial needs. Insurance, loans, money transfers, savings, and remittances are among the financial services available to low-income individuals.
Microfinance- Legal Structure
In India, any financial business is ideally limited to Non-Banking Finance Companies (NBFCs). The Reserve Bank of India (RBI) has granted several business types permission to conduct financing activities to a limited extent.
This article will focus solely on the Micro Finance industry.
Micro Finance Institutions can be run by the two most perfect types of businesses (MFI).
- Non-Banking Finance Company (duly registered with RBI)
- Section 8 Company
MFI Registered with RBI:
MFIs that have been registered with the RBI are governed by Section 25 of the Indian Companies Act, 1956. Newly registered MFIs must have at least Rs.5 crores in net-owned funds.
Steps for registration:
Step 1: File a trademark application for the brand name.
Step 2: Get a certificate of No Lien from the bank by making a fixed deposit of Rs. 5 crores
Step 3: Submit the DPR along with all supporting papers and the project report.
Step 4: Complete the RBI paperwork and obtain certified copies.
Step 5: Submit your application online.
Step 6: Send a copy of your application to the RBI’s Regional Office.
Documents required
- Professional Qualifications/Education evidence of the Director
- KYC and Director’s income proof
- Proof of work experience in the financial sector
- The directors’ most recent credit report
- Net worth certificate of the directors
- Articles of Association and Memorandum of Association
- Incorporation certificate
- The company’s banker’s report
Registration of Micro Finance Company through Section 8 (without RBI)
Microfinance businesses can be for-profit or non-profit, and they can be organized as a trust, non-governmental organization, society, or corporation. Registration does not require RBI permission or minimum funds.
A minimum of two people is required to complete the registration procedure. The company’s directors should have a Digital Signature Certificate (DSC) as well as a Directors Identification Number (DIN).
Steps for Registration:
Step 1: Get your DPR ready.
Step 2: Apply (Form INC-1) for the name of the Micro Finance company to be approved.
Step 3: Apply for a license from the Central Government (Form INC-12)
Step 4: After receiving approval from the central government, file for the company’s incorporation.
Step 5: Obtain the company’s PAN and TAN.
Documents Required:
- DPR
- A copy of the promoters’ PAN, passport, driver’s license, Aadhaar card, or voter ID
- Property records
- The office’s property ownership paperwork
- The latest two months’ electricity bill
- The property’s lease deed or rent agreement
If you want to start a microfinance business or if you currently have one and want to run it lawfully, you can avail the services offered by Corp roots. Please visit the website for more details.
Related article: Frequently Asked Questions on Company Registration in India
