Microfinance companies play a crucial role in providing financial services to low-income groups and underserved communities in India. These companies offer small loans, savings, and other financial products to individuals who may not have access to traditional banking services. If you’re looking to start a microfinance company in India, here’s a step-by-step guide to the registration process and the legal requirements.

Types of Microfinance Companies

In India, microfinance companies can be registered as either:

1. Non-Banking Financial Companies (NBFCs): These are regulated by the Reserve Bank of India (RBI) and require specific approvals and compliance.
2. Section 8 Companies: These are non-profit organizations registered under Section 8 of the Companies Act, 2013, and do not require RBI approval.

Registration Process for NBFC Microfinance Companies

1. Incorporate Your Company: Register your company as a Private Limited or Public Limited Company under the Companies Act, 2013.
2. Ensure Capital Adequacy: Maintain a minimum net owned fund (NOF) of ₹5 crores.
3. Deposit Capital: Deposit the required capital in a bank account.
4. Apply for RBI License: Submit an online application for an NBFC license through the RBI’s official website.
5. Submit Application to RBI Regional Office: Send the physical application along with required documents to the RBI’s regional office.
6. Issuance of RBI License: Upon approval, the RBI will issue the NBFC license, allowing you to operate as a microfinance company.

Registration Process for Section 8 Microfinance Companies

1. Incorporate Your Company: Register your company as a Section 8 Company under the Companies Act, 2013.
2. No RBI Approval Required: Section 8 companies do not need RBI approval to operate as microfinance institutions.
3. Compliance with RBI Guidelines: Ensure that your company adheres to RBI guidelines on microfinance lending.

Legal Requirements and Documents

To register a microfinance company, you will need the following documents:

1. Identity and Address Proof: For all directors and shareholders.
2. PAN Card: For the company and all directors.
3. Memorandum of Association (MOA) and Articles of Association (AOA): These documents outline the company’s objectives and operational framework.
4. Bank Account Statement: Showing the deposit of the required capital.
5. RBI Approval (for NBFCs): Proof of application and approval from the RBI.
6. Board Resolution: Authorizing the registration and operation of the microfinance company.
7. Experience Certificate: For at least one director with more than 10 years of experience in financial services (for NBFCs).

Conclusion

Starting a microfinance company in India involves a detailed registration process and adherence to legal requirements. Whether you choose to register as an NBFC or a Section 8 Company, it’s essential to ensure compliance with all regulatory guidelines to operate successfully and contribute to the financial inclusion of underserved communities.