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A Microfinance Company or institution is a type of NBFC which is not authorized to take deposits but carry out small lending activities to finance the low-income category individuals like small businessman, farmers, agriculturalist, horticulturist etc. Microfinance registration are regulated under the RBI Act of 1934 in India.
To register a microfinance company, applicant has to follow a predefined procedure as per the guidelines of the RBI Act 1934. Here is a step-wise guide or procedure for microfinance registration.
Before applying for Microfinance registration, the applicant must go through document preparation to avoid any chance of cancellation of the application due to shortage of correct documents.
You are required to apply for RBI approval to commence operations of the microfinance company in India. Below is the list of documents required for RBI application for microfinance registration.
Q1. What is a Micro-Finance company?
Ans. Micro-finance company offers the credit and other facilities services to the representatives of the poor strata of the population but do not for the extremely poor strata. Hence, we see that a Micro- finance company or institution is a type of NBFC which is not authorized to take deposits but carry on small lending activities to finance the low-income category individuals like businessman, farmers, agriculturist, horticulturist etc.
Q2. What are the documents required for the registration of a Micro-Finance company?
Ans. Following are the documents required for registration of a Micro-Finance company: 1. Duly certified COI and COC 2. Certified AOA and MOA 3. Board resolution certificate which states that the company will follow norms specified in RBI Act, 1934 4. Audit report 5. Certified copies highest educational qualifications of all directors. Following are the documents required for registration of a Micro-Finance company: 1. Certified copy of COC and COI 2. Certified copy of MOA and AOA 3. Copy of FD receipt 4. Bank certificate for net own funds 5. Audit report with financial balance sheets
Q3. What are the advantages of a Micro-Finance company?
Ans. Following are the advantages of a Micro-Finance company: 1. Good Access 2. Better payment rates 3. Sustainability
Q4. What are the disadvantages of a Micro-Finance company?
Ans. Following are the disadvantages of a Micro-Finance company: 1. Limited Growth 2. High cost 3. Strict Regulation
Q5. How are the Microfinance companies regulated?
Ans. These companies are regulated by the RBI (Reserve Bank of India) as per the master circulars pertaining to NBFC-MFIs. They are based on the RBI Circular No: DNBS (PD) CC No: 395/03.10.38/2014-15.
Q6. Why does interest rate tend to be higher than traditional banks?
Ans. The interest rate in MFIs tend to be higher than that of traditional banks because small loans tend to be more expensive to process than larger ones.
Q7. Who are the clients of the Microfinance companies?
Ans. The clients of microfinance are either below or above poverty line who otherwise do not have access to financial services from financial institutions such as banks.
Q8. What is the rate of interest charged on the loan?
Ans. The new rate of interest of 19.25 % - 20 % was effective from 10 th April, 2018.
Q9. What are the criterias to obtain loans form MFIs?
Ans. Following are the criterias to obtain loans from MFIs: 1. Client should not have borrowed from more than one MFI 2. Client’s total indebtedness should not exceed Rs 1,00,000 3. Client should have an income generating activity 4. Client should have house of their own 5. Client should have documents (ID and Proof) 6. Client should have a bank account.
Q10. What are the minimum and maximum loan amounts?
Ans. Following are the minimum and maximum loan amounts: For On-ward borrowing: Rs. 50 lakhs to Rs. 50 crores For Women borrower: Rs. 15 lakhs to Rs. 35 lakhs For Micro-entrepreneur: Rs. 1 Lakh to Rs. 10 lakhs
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