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Micro Finance companies are the financial institutions that provide financial assistance to the small-scale sector in the form of loans, credit, and savings. With the view to ease the credit system of small-scale sector, the concept of Micro Finance Companies has been introduced. They provide loan to small scale sector as they don’t get a loan from banks easily due to their complex process. Loans are offered by the Micro Finance companies to various small businesses who do not have access to the formal banking channels and who are not eligible for availing loans. Loans are provided at inexpensive rates as instructed by the RBI.
Micro Finance Institutions are categorized as follows-
NBFC-MFIs are the companies which perform functions as similar to Banks. Loans are offered by the Micro Finance Companies to various small businesses who do not have access to the formal banking channels and are not eligible for availing loans.
In India, For MFI registration following steps are required to be taken-
For NBFC-MFI registration, it is required to incorporate a company i.e. either as a Private Company or Public Company.
After company incorporation, the company shall increase the authorized and paid-up share capital up to Rs. 5 Crore. The capital shall be increased in the form of equity Share Capital only.
The amount received from the shareholder shall be deposited in a bank account in the form of Fixed Deposit. A certificate of no lien shall be obtained from the bank once the process is done. An application shall be submitted to the RBI along with a certificate.
For obtaining the CARN (Company Application reference number), an online form shall be filed with the RBI.
The application in the hard copy along with the necessary documents is filed to the regional office of the Reserve Bank of India. Once, the due diligence is done by the RBI, RBI will issue COR (Commencement of Registration)
The role of Microfinance Institutions is mainly in rural and remote areas with the only objective to help and empower the smaller section of society and small businessman who are not eligible to take a loan from any other platform due to lack of documentation and procedures.
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