In recent years, RBI Norms for Microfinance companies have been simplified for small lending business India. Microfinance has been playing a great role in fulfilling the Gap in the Indian financial Eco-system. In this article, we will discuss the Microfinance Company Registration procedure & option available for microfinance lending business in India.<\/p>\n\n\n\n
In the recent time period, RBI Norms for Microfinance Company Registration<\/strong><\/a> procedure has been regulated wisely so that only serious company can enter in this segment. The financial market<\/a> in India is continuously increasing in its size and structure.<\/p>\n\n\n\n Apart from the conventional borrowing sources such as banks and financial institutions, the NBFCs such as micro-finance companies are gradually holding a strong position in the fiscal system. Micro-finance companies are the organizations established to provide financial services to low-income populations and also offer insurance, deposits, and other services. <\/p>\n\n\n\n In the global context also, micro-finance companies are engaged in providing micro credit to villagers, micro-entrepreneurs, impoverished women, and poor families. Earlier, the nature of the micro-finance company was that of a Non-Profit Organization (NGOs) working in the unorganized sector. With the development of the financial market, there has been standardization of the micro-finance companies into the profit-making entities. RBI norms for microfinance companies have been simplified in the recent time so that early-stage NBFC<\/a><\/strong><\/a> company<\/strong> can apply for MFI license<\/strong>.<\/p>\n\n\n\n The registration process for Micro finance Company is as follows:<\/p>\n\n\n\n RBI norms for microfinance companies have been outlined in the detailed operation plan for MFI. All of the micro-finance companies should seek registration with the Reserve Bank of India (RBI) on the official website of the RBI along with necessary documents.<\/p>\n\n\n\n However, before that, the entity should be incorporated under the Indian Companies Act, 2013<\/strong>[1]<\/sup><\/a>. Moreover, it should be noted that every micro-finance company should have membership in CIBIL. The application for the micro-finance registration with RBI should be accompanied by the following documents:<\/p>\n\n\n\n The RBI, after proper examination of the application and the documents and after conducting due diligence<\/strong><\/a>, will issue the Certificate of Commencement of Business of a micro-finance company.<\/p>\n\n\n\n The RBI provides an inclusive meaning of the “Cost of Funds”. It includes the following items:<\/strong><\/p>\n\n\n\n All these will be deducted from interest accrued on security deposits.<\/p>\n\n\n\n Out of the total funds borrowed from the micro-finance companies, at least 50 % should be used for income generation and a maximum of 50 % can be used for other purposes; such as housing repairs, education, medical and other emergencies.<\/p>\n\n\n\n The processing fees charged by any micro-finance company should not be more than 1% of total amount of funds borrowed. A number of fees received should be booked in the accounting<\/a> period in which these are paid or received. The amortization<\/a> of the fees is not permitted.<\/p>\n\n\n\n The cost of loan availed from a micro-finance company is bifurcated into three parts:<\/strong><\/p>\n\n\n\n Some of the essential features of MF Companies are as follows:<\/p>\n\n\n\n Earlier the micro-finance companies were entitled to provide loans up to INR 50000 to the population residing in the rural areas and semi-urban areas of the country. Recently, the limit was increased up to 1.25 lakh rupees in rural and semi rural areas and 2 lakh rupees for urban and semi urban areas. The micro-finance companies should charge a reasonable rate of interest for the borrowers as may be governed by the RBI.<\/p>\n\n\n\nMicrofinance Company Registration Procedure under RBI Act<\/h2>\n\n\n\n
Meaning of Cost of Funds as Stated under Guidelines on “Pricing of Credit”<\/h2>\n\n\n\n
Limitation on Lending Funds for Personal Use\/Emergencies<\/h2>\n\n\n\n
Loan Processing Fees of Micro-finance Companies<\/h2>\n\n\n\n
What is the Cost of the Loan for MFI?<\/h2>\n\n\n\n
Features of Micro-finance Companies<\/h2>\n\n\n\n
Conclusion<\/h2>\n\n\n\n