Micro Finance Company Registration

Micro Finance Company Registration in India – Complete Guide

What is a Micro Finance Company?

A Micro Finance Company (MFI) is a type of Non-Banking Financial Company (NBFC) that provides small loans (micro-credit) to low-income individuals or groups, especially in rural and semi-urban areas, to promote self-employment, women empowerment, and poverty alleviation.

These loans are typically unsecured and range from 10,000 to 2,00,000.

Legal Structure Options:

There are 2 main routes to register a Micro Finance Company in India:

1. NBFC-MFI (Regulated by RBI) – For large-scale lending

Key Requirements:

• Register a Public Limited Company under Companies Act, 2013

• Minimum Net Owned Fund (NOF): 5 Crores

• For Northeastern states: 2 Crores

• Obtain NBFC-MFI license from RBI

RBI Conditions:

• 85% of net assets must be in the form of qualifying assets (microloans)

• Loan amount should not exceed 1.25 lakh per borrower

• Interest rates and processing fees must follow RBI guidelines

• Must follow fair practice codes

2. Section 8 Company (For Small-Scale or NGO Model) – Without RBI license

A Section 8 Company can do microfinance as a non-profit, on a small scale, especially with donor/grant-based models. This model:

• Does not require RBI approval

• Can issue small loans from own funds (not public deposits)

• Must reinvest profits into social causes

• Suitable for NGOs, SHGs, and trusts

Note: Section 8 companies cannot accept deposits or operate at large scale without converting to NBFC-MFI later.

Documents Required (for both models):

For Directors/Shareholders:

• PAN Card

• Aadhaar / Voter ID / Passport / Driving License

• Passport-size photograph

• Address proof (Bank statement / utility bill)

For Registered Office:

• Rent agreement or ownership proof

• Utility bill (not older than 2 months)

• NOC from the owner

Registration Process:

For NBFC-MFI:

1. Incorporate a Public Limited Company

2. Ensure NOF of 5 crores is deposited in bank

3. Apply for NBFC License via RBI COSMOS portal

4. Submit required documents, business plan, policies, etc.

5. RBI reviews, inspects, and issues NBFC-MFI license

For Section 8 Company:

1. Apply for Digital Signatures (DSC) and DIN

2. Reserve name via SPICe+

3. Apply for Section 8 license (Form INC-12)

4. File incorporation documents (SPICe+, MoA, AoA)

5. Receive Certificate of Incorporation from MCA

Post-Registration Compliance:

NBFC-MFI:

• Regular returns to RBI

• Appointment of statutory auditor

• Credit rating (if applicable)

• Maintain minimum capital adequacy ratios

• Quarterly and annual reporting

Section 8 Company:

• File annual returns with ROC

• Maintain minutes, resolutions, and accounting

• Apply for 12A and 80G for tax exemption (optional)

• Use funds only for charitable lending

Why Choose SSA TAX for Micro Finance Company Setup?

We provide end-to-end services for:

• Choosing the right legal structure (NBFC-MFI or Section 8)

• Incorporation, RBI filing, and license application

• PAN, TAN, bank account setup

• Business plan & compliance support

• Ongoing legal, tax, and financial advisory