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This article is written by Kanti, a student of the University of Delhi. In this topic, she talks in detail about the procedure required in setting-up a microfinance in different ways.


Microfinance company also known as Micro Finance Institution is a type of institution which provides a small amount of loan up to INR 50,000 primarily in rural and semi-rural areas where other banking facilities are not easily accessible.

In India, only Non-Banking Finance Companies are allowed to do finance business, but some other institutions are also given the leverage to do such activities to an extent.

Modes to register a microfinance company

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  • Through NBFC- It requires a minimum capital of INR 5 crore.
  • Through Section 8 of Companies Act, 2013- No minimum capital is required.

But not all of the NBFCs are allowed to take deposits from the people. To have the taking deposits status, a different application has to be filed with the RBI.

Registration through NBFC

To start a microfinance company as NBFC, one has to get a license from the Reserve Bank of India under Section 45I(a) of the RBI Act, 1934 and this whole process may take months to complete.

What are the requirements for registration with RBI?

A company desirous of commencing the business of non-banking financial institution should comply with the following:

  1. It should be a company registered under section 3 of the Companies Act, 2013.
  2. It should have a minimum net owned fund of INR 2 Crore.

The following steps are involved in the registration


The first step to start a microfinance company is to register the company as a private or public company under the Companies Act. Initially, the company can be registered with INR 1 Lakh.


The minimum net worth required to register an NBFC is INR 2 Crore. So the next step is to raise the share capital both authorized and paid up up to the required amount.


The next step is to get to deposit the sum of INR 2 crore in the Fixed Deposit in a freshly opened account and get a ‘no lien’ certificate from the bank. This certificate is needed when the application is filed with RBI.


To fill the online application available on the RBI website, the following documents are required-

  • Duly certified Copies of Certificate of Registration.
  • Certified copies of only the main object clause in the MOA relating to the financial business.
  • Copy of Board resolution along with the self-declaration on behalf of the company that applicant company shall follow all the rules, regulations and notifications issued by RBI.
  • A copy auditor’s report of Fixed deposit receipt & bankers certificate of lien indicating balances in support of Net Owned Funds (NOF).
  • Bankers Report for applicant company, group companies.
  • Certified copies of the highest educational and professional qualifications of all the directors of the applicant company.


  • Go to the provided link
  • Click on the “CLICK HERE” for company registration on the registration page.
  • A window will be displayed showing the excel application available for download.
  • Download the suitable application form (NBFC or SC/RC).
  • Fill up the application form.
  • Upload it to the same website.

The company would then be issued a Company Application Reference (CoA) Number for the application filled online.


Once the application has been filed online, the hard copy of the application indicating the online CoA number along with the supporting documents shall be submitted to the concerned Regional Office by the applicant company.The company can always track the status of the application form by logging into the above-mentioned address using the CoA Number.

Total Cost for Registration

The total cost for NBFC registration is around INR 4-5 lakhs including professional fees and RBI fees.

Who Can Borrow Loan From MFI (Microfinance Institutions)

An individual borrower with a total annual income not exceeding INR 1,00,000 in rural areas or INR 1,60,000 in urban and semi-urban can take loans up to INR 1 Lakh from two MFIs at the most. MFIs, in the first cycle of the loan, can disburse up to INR 60,000.

*** Documents Required initially to start the Business

If you are willing to register a Private Limited Company for NBFC registration, then you shall need at least two persons to start with. The minimum documents required for registration are as follows:

  • Copy of PAN CARD
  • ID Proof (Driving License, Passport, Aadhaar Card, Voter ID) – anyone
  • Address Proof (Bank Statement, electricity bill, Mobile Bill, Telephone Bill) –anyone
  • Passport Size photo

Apart from the above, we need the following documents for registered office registration:

  • Rent agreement or ownership documents
  • Electricity bill
  • A copy of No Objection Certificate (NOC) from the owner.


The second way is to register a section 8 company & apply for central government licenses features of which are as follows:

    • Maximum INR 50,000 can be given for the business purpose and INR 125,000 for the residential dwelling.
  • No minimum net owned fund requirement.
  • No RBI approval is required since RBI has exempted such companies from registration.

The registration procedure can be divided into 7 steps. Let us read the process in detail:


This is the first step towards initiating the section 8 company registration. One can go to this website MCA services DSC Services/ DIN Services.

DSC– An applicant who wants to get his Digital Signature Certificate(DSC) issued can go to the Certifying Authorities directly with the required documents in original and self-attested copies of the same. Some CAs also provide Aadhar eKYC based authentication also.


  1. Any person who intends to apply for DIN shall have to make an application in eForm DIR-3 and should attach the following documents along with the form-
  • Photograph and the scanned copy of supporting documents which are required.
  • Verification by the applicant containing the name, father’s name, date of birth, present address, a text of declaration and physical signature of the applicant.
  • Digital signature.
  1. The eForm shall be uploaded on the MCA21 portal and shall be digitally signed.
  2. Once the form has been uploaded, the fees for the DIR-3 form shall be paid through electronic means only (i.e. Netbanking/ Credit Card).
  3. After successful payment of the fees, the applicant should register himself/herself on the MCA21 portal page. By using the login id given, log in to the same page and upload the eForm DIR-3 on ‘eForm upload’
  4. Once the form is uploaded and payment is made, approved DIN shall be generated and if the details are identified as potential duplicate, Provisional DIN shall be generated. In such cases, the MCA DIN cell will examine the eForm DIR-3 and same shall be disposed of within one or two days.


This is the second step towards registering the section 8 company. The name may end with the words like Sanstha, foundation etc. Microcredit can also be used in the company name. One has to provide minimum 3 different names and maximum 6 names. Additionally, the name must be suggestive of company’s work. Fill INC-1 form available on the same website to register the name.

#STEP 3: MOA and AOA

After the name has been approved, draft the MOA (Memorandum of Association) and AOA(Articles of Association) and then file them along with the following documents in eForm INC 12 for the issuance of license-

  1. INC-13 Memorandum of Association
  2. Article of Association
  3. INC-15 Declaration by each Subscriber to MOA (On Non- judicial stamp paper of INR 100/- and duly notarized).
  4. A statement describing an estimate of Income & Expenditure for the next three years and it should be signed by the proposed promoters.
  5. List of proposed Promoters and Directors of the Company.
  6. The Subscribers page (AoA & MoA), handwritten by the subscribers and witness.

Once the Form INC 12 has been approved, a license under section 8 of the Companies Act,2013 will be issued in Form INC-16.


After the license has been issued, the applicant is required to fill the following forms-

I.Form No. INC – 7 (Application for incorporation of the Company) along with the following attachments:

  1. Memorandum of Association
  2. AoA Declaration in Form No. INC-8
  3. An affidavit from the subscribers to the memorandum in Form No.INC-9
  4. Proof of residential address of Subscribers
  5. Specimen Signature in Form No. INC-10
  6. Proof of Identity of Subscribers (NOC in case there is a change in the promoters after name approval).
  7. PAN card.

II. Form No. INC – 22 (notice of situation of registered office) along with the following attachments:

1.Conveyance/Lease Deed/ Rent Agreement (Proof of ownership)

  1. Electricity Bill Not older than 2 months.
  2. No Objection Certificate.

III. Form No. DIR – 12 ( for the appointment of directors of the company) along with the following attachments:

1.DIR-2 (consent to act as Directors)

2.Affidavit by the Directors for Not accepting Deposits (On Non- judicial stamp paper of INR 100/- and duly notarized).

  1. INC-9 Declaration by each Subscriber to Memorandum of Association (On Non- judicial stamp paper of INR 100/- and duly notarized).


A Certificate of Incorporation is issued by the Registrar of Companies along with a unique Company Identification Number (CIN) if the Concerned ROC is satisfied with the incorporation forms.

#STEP 6: PAN and TAN

Nowadays, the PAN and TAN are allotted once the company is formed. The physical copy of PAN card is sent via speed post at the registered office of the company.

Now, let us quickly see the difference between Microfinance through section 8 company and NBFC

Basis of Difference Section 8 – Micro Finance RBI Reg – Micro Finance
RBI approval No RBI approval required RBI approval required
Minimum capital No minimum capital required Min of INR 200 Cr required
Compliance Lesser compliance Heavy Compliance
Registration cost Low High
Interest rate Same as per RBI guidelines Same as per RBI guidelines
Loan Can give an unsecured loan to small business, household woman etc. As defined by RBI
The loan limit (max) INR 50,000 for small business and INR 1.25 lakh for setting up residence dwelling. INR 50,000 initially and subsequently it can be INR1 lakh.


The major challenge one can face in this business is already established financial institutions such as banks, money lending firms etc. who are offering the same services which you intend to provide. The only way to handle this challenge is to create your own market. Though practically it is advised to start with section 8 company as it is a low-cost process.


  1. Hi! I want to start a micro finance company. But I will be providing non liquid cash loan. I want provide loan for purchase of mobile, laptop, fridge, tv, washing machine, inverter, ac etc.
    However, I dont have enough capital to spend on license and registration. How do I start one legally without having to spend much on license and registration. And where should I seek for guidelines in this case. Please help me

  2. Dear Kanti,
    I just go through your article and found your post useful. Can you please let me know which is the best micro finance company in Delhi Area?

  3. But SEc 8 company cant earn profit if am not wrong.
    Then how it is useful via Sec 8, also is Sec 8 company allowed take deposits from individuals without Approval from RBI

  4. Very informative article!!
    What are the micro-finance rules for section 8 companies and how the control over Section 8 companies with regards to micro finance is exercised?
    From where they get the finance to micro finance??


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