Micro finance Company Registration

20 April 2022

Microfinance firms, as the name implies, are financial institutions that give funds to low-income groups, where the need for funds is lower than in other sectors of society. Traditional financial institutions, such as banks and other financial institutions, are often unavailable to these areas.
Need for Micro finance Company Registration
Many entities, such as banks, provide loans to enterprises in India. So, why do we require Micro finance Company Registration? The requirement arises because it provides the following functions:
It gives financial help to businesses that are unable to provide collateral.
It promotes female entrepreneurship.
It offers much-needed assistance to entrepreneurs.
It provides support even for little sums, which are often funded by hand loans.
It formalises the loan process, bringing about discipline in low-income borrowing. This eliminates overborrowing and reduces the issues that might arise from large future obligations.
Micro finance Company Registration as an NBFC
The Micro finance Company Registration procedure differs significantly because to the variations in the two models for founding a microfinance organisation. The stages involved in registering a microfinance firm through an NBFC are as follows:
Create a firm: The first stage in becoming an NBFC Micro finance Company Registration is to form a private or public company. A private business must have at least two members and a capital of Rs 1 lakh to be formed. A minimum of seven members are necessary to start a public business.
Raise capital: The next stage is to raise the needed Rs 5 crore in net owned cash. The demand for the northeastern area is Rs 2 crore.
Deposit the capital: Once the money has been collected, the next step is to deposit it in a bank as a fixed deposit and receive a 'No lien' certificate for it.
Finally, the NBFC must complete an online licencing application and submit it together with all of the verified documentation. A paper copy of the application and licence must also be presented to the Reserve Bank of India's regional office.