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How to set up Micro Finance Institutions as NBFC?

We can set up our Microfinance institution as an NBFC. There are certain specifications and demands that should be met for setting up the MFIs as NBFC. There are certain documents also that need to be filed. In this article, we shall discuss the complete process of how to set up a Microfinance institution as NBFC.

What are the Documents required for setting up MFI as NBFC? The following list of documents should be filed with the Reserve bank for setting up MFI as NBFC:

1.Certified copy of incorporation certificate

2.Certified copy of the extract of the main object clause as provided in the MOA

3.Copy of the board resolution specifying that

  • The company should not carry on any type of NBFC activity or will not do it unless getting the certificate of registration.
  • The company should not accept any public deposits and if it accepts in the future then it will get approval by RBI.
  • The company should formulate Fair practices code according to the guidelines of the RBI.
  • The company should be a member of the credit information companies and it would be a member of a minimum of one self-regulatory organization
  • The company should support the rules and regulations of pricing of credit, fair practices in lending, and non-coercive method of recovery as per the RBI guidelines
  • The company should have limits of fixed internal exposure
  • The company should not be licensed under section 8 of the Companies Act 2013/Section 25 of Companies Act 1956

4.The company should have fixed deposit receipts copies and banker’s certificate of no lien indicating balances in support of NOF

5.If the company is already in existence, an audited balance sheet and profit and loss account with directors and auditor’s report is required

6.Copy of the highest education certificates and professional qualifications with respect to directors

7.if have experience in the financial services sector, required copy of the experience certificate

8.Report of the banker

9.For Attaining 85% qualifying assets required Roadmap

Incorporation of MFI as NBFC An MFI can be registered as an NBFC in the following way:

1.A company should be incorporated under the Companies Act provisions, whether it’s public or private

2.Should open a bank account after the incorporation in the name of the company and in the form of share capital maintain NOF up to 5 crore rupees or 2 crore rupees in case of NE state

3.As MFIs are regulated by the Reserve Bank, after incorporation the same has to be registered under the RBI

4.File the above mentioned documents

5.Submit an online application by downloading it from the RBI official website and fill up the application and submit it for verification and registration process with all the required documents. Once it is uploaded, a company application reference number will be provided

6.Submit the hard copy of the application with the Company Application Number and supporting documents to the regional office of the reserve bank

7.The final step involves coordination with the reserve bank on a timely basis and compliance with all instructions. Then the RBI will release the Certificate of Registration.

It is worth mentioning here that all the process given here is detailed information based on the same provided under the RBI Act and its rules that govern the MFIs. Therefore all the visitors must visit the RBI official website or Act to remain updated with all the formalities and information about the incorporation of MFIs.

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