MICRO FINANCE COMPANY REGISTRATION
Section 8 Microfinance Company Registration Process & fees
To register as a microfinance company either through an NBFC or Section 8 company, some prerequisites must be met. The requirements are as detailed below:
Prerequisites NBFC Section 8 company Approval of RBI Mandatory Not Required Net owned funds Minimum 7 crores No minimum requirement Director experience One director must have experience of more than 10 years in financial services No prior experience required Limit on loans Maximum of 10% of total assets Unsecured loan of Rs 50,000 to small businessLoan up to Rs1.25 lakh to dwelling residence Complexity of Microfinance Company Registration All processes involved in forming a company have to be performed. Relatively simple as it is registered as a non-profit organization Adhering to Compliances It has to adhere to all compliances of an NBFC. Adhere to compliance of RBI, but they are less stringent in comparison to NBFC No of members For a private limited company minimum of 2 For a public limited company minimum of 7 Minimum of 2 members
What is section 8 Microfinance Company?
A Area 8 Microfinance company enrolled beneath the Indian Companies Act, 2013. With The objective is to supply monetary help to little trade bunches that are avoided from the formal keeping money framework. Essentially put, getting a loan from the bank may be a monotonous prepare. A Segment 8 Microfinance Company can offer credits, protections, and other items to its clients without requiring any collateral or security. The point of a Area 8 Microfinance Company is to advance social welfare and financial improvement among the destitute and marginalized segments of society.
What is Microfinance Loans?
| Feature | Details |
|---|---|
| Loan Amount | Typically ₹10,000 to ₹2,00,000 (can vary) |
| Collateral | Usually not required (unsecured loans) |
| Target Borrowers | Low-income individuals, women, small entrepreneurs, self-help groups (SHGs) |
| Purpose | Income-generating activities like farming, tailoring, small shops, livestock, etc. |
| Interest Rate | Usually higher than traditional bank loans due to higher risk |
| Repayment Term | Short-term, often weekly or monthly repayments |
| Lender Types | Microfinance Institutions (MFIs), NGOs, Section 8 Companies, NBFC-MFIs, Cooperative Societies |
What are tha features of a section 8 Microfinance Company
A Section 8 Microfinance Company is a non-profit company formed under Section 8 of the Companies Act, 2013, with the objective of providing financial services to the poor and underserved, especially through micro-loans. Here are its key features:
What is the process of section 8 Microfinance Company Registration?
For Directors and Promoters:
PAN card (mandatory)
Aadhaar card or passport (for address proof)
Passport-size photographs
DIN (Director Identification Number) – will be generated during application
Digital Signature Certificate (DSC) – mandatory for all directors
For Registered Office:
Rent agreement/lease deed (if rented)
NOC from property owner
Utility bill (electricity, water, etc.) – not older than 2 months
2. Apply for DSC (Digital Signature Certificate)
Mandatory for filing forms with the Ministry of Corporate Affairs (MCA).
3. Name Approval via RUN (Reserve Unique Name)
File the RUN application on the MCA portal to reserve the company’s name.
The name should reflect the company’s charitable and microfinance objectives (e.g., “Foundation,” “Society,” “Sewa,” etc.).
The suffix “Private Limited” or “Limited” is not used in Section 8 Companies.
4. Draft MOA and AOA
MOA (Memorandum of Association) should include charitable and microfinance-related objectives.
AOA (Articles of Association) governs internal rules.
5. File INC-12 for Section 8 License
Apply for a Section 8 license from the Registrar of Companies (ROC).
Attach the following:
MOA & AOA
Declarations by directors in Form INC-15
Statement of estimated annual income & expenditure (for 3 years)
Projected activities
Declaration under Rule 19(2) of the Companies (Incorporation) Rules
6. File SPICe+ (INC-32) for Incorporation
After obtaining the license, file the SPICe+ form for company incorporation.
Attach:
Section 8 license
DIR-2 (consent of directors)
Declaration by professionals
PAN and TAN application
7. Certificate of Incorporation
After successful scrutiny, ROC issues a Certificate of Incorporation with a Section 8 Company license number.
8. Apply for PAN, TAN, and Bank Account
Apply for the PAN and TAN through SPICe+ or separately.
Open a bank account in the name of the company.
What are Section8 microfinance company registration fees?
The enlistment prepare for a Area 8 company in India includes different government expenses, counting those for getting a Advanced Signature Certificate (DSC), Chief Recognizable proof Number (Noise), title endorsement, and Certificate of Consolidation (COI). These expenses can run from around INR 5,000 to INR 2+ lakhs and depend on the authorized capital of the company, which can begin from one lakh to over a crore.
In expansion to the government expenses, there may be charges for drafting the Reminder of Affiliation (MOA) and Articles of Affiliation (AOA), as well as for getting a Lasting Account Number (Container) and Assess Account Number (TAN). These expenses regularly begin from around INR 5,000
Latest RBI Guidelines for Section 8 Microfinance Company
As of the latest available information, the Reserve Bank of India (RBI) has established a comprehensive regulatory framework for microfinance loans, effective from April 1, 2022. This framework applies to all entities engaged in microfinance activities, including Section 8 Companies.
Key Highlights of the RBI’s Regulatory Framework for Microfinance Loans:
Definition of Microfinance Loan:
A microfinance loan is defined as an unsecured loan to a household with an annual income not exceeding ₹3,00,000.
Household Income Assessment:
Regulated Entities (REs) are required to assess the annual household income to determine eligibility for microfinance loans.
Limit on Repayment Obligations:
The total repayment obligations of a household should not exceed 50% of the household’s monthly income.
Pricing of Loans:
Interest rates on microfinance loans are to be determined by the Board of each RE.
REs must disclose pricing-related information, including interest rates, processing fees, and any other charges, in a standardized and simplified format.
No Collateral Requirement:
Microfinance loans are to be extended without any collateral.
Multiple Lending and Over-Indebtedness:
REs should have a board-approved policy for the assessment of household income and indebtedness.
They must also put in place systems to monitor over-indebtedness and multiple lending.
Recovery Practices:
REs are required to put in place a board-approved policy regarding the conduct of employees and outsourced agents for recovery.
They must ensure that recovery practices are non-coercive and comply with the guidelines laid down by the RBI.
Grievance Redressal Mechanism:
REs must have a dedicated mechanism for redressal of customer grievances.
They are also required to display the contact details of the grievance redressal officer at all branches and on their website.
Transparency and Disclosures:
REs should provide a loan card to borrowers, which includes details such as the effective rate of interest, all other charges, and the total amount to be repaid.
They must also display the interest rate range and other charges on their website and at all branches.
Frequently Asked Questions microfinance company registartion section 8
1. What is a Section 8 Microfinance Company?
2. Can a Section 8 Company do microfinance activities?
3. Is RBI approval required for a Section 8 Microfinance Company?
4. What is the minimum capital required to start a Section 8 Microfinance Company?
5. What documents are required for registration?
6. Can a Section 8 Microfinance Company give collateral-based loans?
7. What are the benefits of registering as a Section 8 Microfinance Company?
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Avijit Chowdhury
Founder & CEO at Smritikana Business Solutions linkedin Avijit Chowdhury is aTax Consultant profession and an entrepreneur by passion. He has wide industry experience in Finance, retail, manufacturing, and entertainment and has handled various national assignments. He is the co-founder and CEO of Smritikana.com Smritikana Business Solutions, an online tax filing platform, provides the easiest way to e-file your Income Tax Return in India. Through Smritikana.com Smritikana Business Solutions, Avijit endeavors to revolutionize how individuals file their income tax returns, offering a seamless and user-friendly experience.