What is a Microfinance Company?
A microfinance company is a type of nbfc (non-banking financial corporations) which is engaged in money lending services for small borrowers or business owners. A microfinance company has to maintain a portfolio in which it contains 85% micro industries to qualify to be an MFC. This type of financial institution is best for small borrowers who don’t have the reach to traditional capital sources such as banks, VCs and investor.
Who is Considered as Micros?
- Income of borrower must not exceed 1 lakh in a rural area and 1.5 lakh in urban areas.
- Loan amount must not exceed 50k in the first cycle and 1 lakh in subsequent cycles.
- Loan extension doesn’t require any collateral.
It requires RBI approval to carry out microfinance operations.
How to Register a Microfinance Company?
Microfinance company registration is a complex procedure which takes months to complete. Firstly, the applicants are required to file a company registration application and then they have to file an application for RBI approval to carry out finance operations. Due to this; the registration procedure becomes complex and time-consuming.
Here is a microfinance company registration procedure in brief:
A microfinance company is required to be registered as a private or public limited company with an initial paid up capital of 1 lakh INR.
Increase in Authorised and Paid-Up Capital to 2 crores
To register an NBFC in India, the company must have 2 crores of net worth. Therefore an MFC is required to raise its minimum paid-up capital to 2 crores for further processing.
Get Bank Certificate for Deposit
MFC has to deposit 2 crores as fixed deposit in the bank and obtain bank certificate which is to be deposited in RBI approval application form.
Document Submission for RBI Registration
Now comes the step to submit all required documents for microfinance company registration and RBI approval. Here is the checklist of documents for MFC registration and approval.
- Certificate of Registration
- MOA and AOA of the company
- Board resolution document
- Bank certificate of net owned funds
Bankers Report for Company
File Online Application Form for microfinance company registration
Submit a hard copy of company registration application along with required documents at regional RBI office.
Fill form for microfinance company registration.
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