How to start a micro-finance firm in India

Microfinance generally termed as Micro credit can be registered under section 8 of companies act. 2013. if you wish to register as MFI then you need to register As Private limited or Limited company as MFI (Micro finance institution )

In practical 99% micro finance pronounced as Micro credit and most of them registered as NPO ( Non profit organization ) however actual Finance finance registration should be termed as License from RBI under Section 45–1A of the RBI Act. the minimum paid up capital with fixed deposit is Rs. 5 crore in other than North east ( Only Rs. 2 cr) .

What is good for startup –

If you wish to start finance business then your should prefer to register your self with low cost company. only you will not allowed to have CIBIL access since the loan size is less than 2 lac. Lets register for Micro credit or Nidhi company ( Nidhi Company Registration )

There are some big micro finance registered under this act and assets size is more than 2000 cr. Bhartiya Micro Credit | Home

Procedure for micro finance company registration as MFI

What Is An NBFC-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.

India is world No.2 fastest growing economy with a large population. 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 fiancé institutions (MFI) mainly working in villages / remote area to empower farmers and small business in villages.

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NBFC is to be registered NBFC-MFI the minimum paid-up capital should be not less than Rs. 5 crores. If an NBFC-MFI registered in North-east region of the India the minimum paid capital requirement is only Rs. 2 Crore. NBFC-MFI 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.

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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

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