February 4, 2017

Micro Finance Registration

What is an MFI

Micro Finance Institution (MFI) is a non-deposit taking NBFC (other Than a company licensed under section 8 of the Companies Act. 2013)

NBFC performs banking at small level as a bank does.

MFI Exist at very small level than NBFC.

MFI stands for Micro Finance Institutions are providing similar lending services as NBFC to the poor and weak sections of the society who do not have access to regular banking facilities.

MFI Provides small loan amount Rs. 10,000 to 20,000 to start a business.

Government banks and private sector banks can not open their branch in every village.

Though Indian banks have increased their presence but still have limited reach in remote areas.

Micro Finance Institutions (MFI) mainly working in villages or remote area to empower farmers and small business in villages.

NBFC’s is to be registered NBFCMFI the minimum paid-up capital should be not less than Rs. 5 crores.

If an NBFCMFI registered in North-east region of the India the minimum paid capital requirement is only Rs. 2 Crore.

NBFCMFI has to maintain 85% as Qualifying assets all the time.

Who can borrow loan from MFI (Microfinance Institutions):

A borrower with a total annual income does not exceed Rs. 60,000 in or Rs. 1,20,000 in urban and semi-urban and Amount of loan can not be more than Rs. 50,000/-

What should be tenure of loan and repayment method

A minimum lending period should not be less than 24 months and Brower can make repayment without any penalty if loan amount more than Rs.15000. MFI has to give a loan to eligible borrowers without any collateral or margin money. MFI has to offer at least 70% of total loan amount to borrowers for Income generation. Borrowers will have the choice to repay the loan amount on weekly or fortnight or monthly installments.

Can NBFC-MFIs lend funds for personal use of borrowers

MFI may give loan for the personal purpose of the borrowers as well, but the aggregate amount of loans can not exceed 30% of the total loan.

Is there any restriction on interest rate of MFI

Yes. NBFC-MFI can not charge a higher rate of interest. Maximum cost of fund+ 10%

Is there any restriction on loan processing charges of MFI

Loan processing fees can not be more than 1% of the gross loan amount. Loan insurance charges may be levied separately.

Can an NBFC-MFI charge a differential rate of interest to its customers?

Maximum Variation in interest rate cannot exceed 4%.

Is it essential for NBFC-MFI to become a member of CIBIL?

Yes. Every NBFC & MFI need apply for CIBIL membership

Procedure for NBFC-MFI Registration:

1. Company Registration:The first step is to form a new Public Limited Company under the Companies Act
2.Minimum Net Owned Fund: NOF should be Rs. 500 Lac After the incorporation of a new Company in the form of Equity share capital. The Capital to be raised after incorporation of a company here should be Equity Share Capital and not Preference Share Capital.
3.The Opening of a Bank Account:The amount which is received post incorporation of the company shall be deposited in a bank account as Fixed Deposit and its must be free from all aliens.
4.Application to RBI:Application to RBI for Business Operations
5.RBI:RBI will conduct due diligence and will issue certificate of commencement of business.


Documents Required

  1. Certified copy of up-to-date Memorandum and Articles of Association of the Company.
  2. Certified copy of up-to-date Memorandum and Articles of Association of the Company.
  3. Banker’s Report in a sealed envelope.
  4. Auditors report about receipt of minimum net owned fund.
  5. A certificate of Chartered Accountant regarding details of group/associate/subsidiary/holding companies along with details of investments in other NBFCs as shown in the Performa Balance Sheet.

Costing for :Micro Finance Registration All Inclusive fees@ Rs.6,69,999

Compare Your Options

Particulars NBFC-MFI
(Micro Finance )
NBFC-ND Multi-state
Credit society
Nidhi Company
(Mutual benefit Society )
Governing Laws RBI Act. 1934 RBI Act. 1934 MSCS Act. 2002 Companies Act. 2013
Recommended for Poor and lower income group. Commercial Banking Business Non-Commercial Banking and NPO Member based
Mutual benefit society
Initial Capital Minimum Rs. 5 Crore. Minimum Rs. 2 Crore For General credit Rs. 2 Lakh and for Urban bank Rs. 4 Crore Rs. 10 Lakh
Loan Limit Maximum Rs. 50,000 No. No. No.
Members 7 /2 7 / 2 Min 50 from at least 2 state. In total 100 7 at the time of registration and after registration min 200.
Directors 3 / 2 3 / 2 7 3
Operations PAN India PAN India In a District or state PAN India
Credibility 10/10 10/10 6/10 8/10
Registration time Maximum 180 Working days Maximum 120 Working days Maximum 120 working days Maximum 40 working days
Registering Authority ROC & RBI ROC & RBI State Government and Central Govt.  Registrar of Companies
Popular High High Low Medium
Deposits No. No. Yes. freely from public with certain limitation Yes. From only its members
Loan For lower income group To Everyone To Everyone To Members only
Funding From Members and Governments From Members and FDI From Members and Public From Members only
Government aid High No. Low No
RBI License Yes. Yes. No. No.
RBI Act Yes. Yes. Yes. Yes.
close slider