Suitable for Starting a New Finance Company Registration
Finance Company Registration without a lot of conditions
New Finance Company Registration with RBI License
Micro Finance Company Registration is an ideal process if an entrepreneur is looking for a business of providing funds on an interest basis to the public without getting involved in guidelines of RBI or even Nidhi Rules 2014.
These companies need not follow the banking guidelines as mentioned by RBI circulars and provide easy finance to the weaker section of the society.
Financing to those who require funds, this is the ultimate motto of a Micro Finance Company Registration.
RBI guidelines specifically exclude Micro Finance Companies to follow the rules and regulations as applicable on banks or NBFCs, hence Section-08 Micro Finance Company can start its work without RBI Approval or Licence
Micro Finance Company itself is a company that can enjoy all the benefits that a normal company possesses with it. Similarly, it needs to follow the rules mentioned in the Companies Act 2013 as well.
Section-08 Micro Finance Company has the objective of welfare and upliftment of the weaker section of the society by providing them financial assistance in their business or for their dwellings.
Section-08 Micro Finance Company attracts less compliance to itself than a Nidhi Company or NBFCs or Banks. Because of which it attracts customers in the potential market.
Other Finance Companies like Nidhi Company or NBFCs need to have a certain amount of Net Owned Funds before starting its business, but there is no such condition for Micro Finance Company
Micro Finance Company Registration can be done minimum with 2 Directors and Shareholders which is lower than other formats of Finance Company Business like 7 members in Nidhi and NBFCs
A Micro Finance Company is allowed to charge interest on loans maximum to Average Base Rate of 5 largest commercial banks multiplied by 2.75 p.a. which will be approx 26% p.a.
A Micro Finance Company is allowed to provided loans to a weaker section of the society up to Rs. 50,000 and Rs. 1,25,000 to Dwelling Residence.
Micro Finance Company can provide only unsecured loans which means no collateral can be charged on the loans provided by the company.
RBI guidelines are applicable to companies registered as NBFC in India which requires mandatory approval from RBI before starting its business in India. Also, the company needs to follow all the regulations as specified by RBI from time to time.
The NBFC Registration process can be completed only if it contains a director who has experience of at least 10 years in financial services. Without an experienced director, RBI approval will not be provided.
Unlike a Micro Finance Company (which is a Non-Profit making company), an NBFC is a profit-making company and can generate profit in the course of its business.
After NBFC Registration Service gets completed company needs to follow all the rules and regulations as mentioned by RBI circulars. As compared to Nidhis and Micro Finance Company, NBFCs have a lot of rules to follow in the course of business.
NBFC needs to have at least Rs. 2 Crore as its Net Owned Capital before applying for a licence from RBI.
NBFC can be a Private Limited or Public Limited Company.
The RBI has not specified any interest rate that can be charged by any NBFC. However, to ensure transparency in such matters, the NBFCs have been advised by the Reserve Bank to adopt a Fair Practice Code with the approval of their Boards.
RBI Licence for NBFC will be provided only if all the persons or promoters of the company are having a good CIBIL score as of the date of application of license.
NBFCs can provide Secured or Unsecured loans to the public.
There is no such boundation as in the case of Micro Finance Company.
NBFC shall not have more than 10% of its total assets as loans meeting “Qualifying Assets” criteria as defined in the Directions. NBFCs are required to abide by the guidelines issued to NBFCs in general, regarding the terms and conditions of these loans.
Maximum 50% of the aggregate amount of loans may be extended for other purposes such as housing repairs, education, medical and other emergencies. The aggregate amount of loans given to a borrower for income generation should constitute at least 50% of the total loans from the NBFC-MFI.
Home loans generally have mortgages of a dwelling unit. If all conditions as applicable for qualifying assets including collateral-free loans and not less than 50% of the loan for income generation purpose are met, these may be treated as qualifying assets.
NBFC Registration Process involves intense documentation which can be seen on the website of RBI→ Regulation → Non-Banking → Forms → Documents required for registration of NBFC-MFI
Processing fees should be booked in the same accounting period in which these are paid/ received and amortization of the same is not permitted in future years.
Yes, an NBFC-MFI can charge a differential rate of interest to its customers but the variance for individual loans between the minimum and maximum interest rate cannot exceed 4 percent.
No, an NBFC cannot impose a penalty on the prepayment of loans.
RBI has made it mandatory for the Company taking NBFC Registration Service to prominently display in all its offices and the literature issued by it and on its website, the effective rate of interest being charged by it.
Yes, Every Company taking NBFC Registration Service has to be a member of all Credit Information Companies (CICs) established under the CIC Regulation Act 2005
The moratorium shall not be less than the frequency of repayment. For example, in the case of the monthly repayment, the moratorium shall not be less than one month.
No, the credit concentration norms are not applicable to NBFC-MFIs.
No, Membership to the SRO is not mandatory. However, companies taking NBFC Registration Service are encouraged to voluntarily become members of at least one SRO.
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