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Microfinance is at the heart of India’s financial inclusion story — bringing credit, savings, and insurance to millions of low-income households, small entrepreneurs, and rural borrowers who sit outside the reach of mainstream banking. For promoters and social entrepreneurs, setting up a microfinance company is a meaningful way to combine impact and returns, while building a regulated, scalable lending business.
In India, microfinance activity can be carried out either as an NBFC-MFI registered with the Reserve Bank of India or as a not-for-profit Section 8 Microfinance Company. The two structures have very different capital, regulatory, and operating implications — choosing the right route is the most important early decision for any microfinance promoter.
We offer end-to-end advisory for microfinance company registration — from selecting the right structure, incorporating the entity, and structuring Net Owned Funds (for NBFC-MFI), to preparing policies, filing applications, and setting up the compliance backbone — so you launch a microfinance business that is regulator-ready from day one.
₹10 Cr
NOF for NBFC-MFI
85%
Qualifying assets (MFI loans)
4-6
Months typical timeline
RBI / MCA
Regulator based on route
Regulations & Frameworks We Work Under
RBI Act, 1934
RBI Microfinance Regulations
Companies Act, 2013
Section 8 (Not-for-Profit)
SBR Framework
Fair Practices Code
KYC / AML / PMLA
Digital Lending Guidelines
Two Routes to a Microfinance Company
Route 1
NBFC-MFI (Regulated by RBI)
A for-profit NBFC-Microfinance Institution registered with the Reserve Bank of India, dedicated primarily to microfinance lending.
- Minimum NOF of ₹10 crore
- Minimum 85% qualifying MFI assets
- Directly regulated by RBI
- Eligible for bank lines, NCDs, and ECB
- Scalable, institutional, investor-friendly
- Comprehensive RBI compliance obligations
Route 2
Section 8 Microfinance Company
A not-for-profit company incorporated under Section 8 of the Companies Act, undertaking limited microfinance activities.
- Registered with the MCA
- No RBI registration required
- No minimum capital mandated by MCA
- Restricted in scale & member exposure
- Cannot distribute profits to promoters
- Best suited for mission-driven, small setups
What’s Included in Our MFI Registration Package
Structure Advisory
Guidance on choosing between NBFC-MFI and Section 8, based on capital, scale, and impact goals.
Company Incorporation
Incorporation of the company under the Companies Act, 2013 with MFI-specific objects in the MOA.
Capital Structuring
Structuring of Net Owned Funds (NOF), shareholding, and funding plan for NBFC-MFI route.
Business Plan & Projections
Detailed 5-year business plan, borrower profile, lending strategy, and financial projections.
Policies & Framework
Credit policy, FPC, KYC/AML, pricing, recovery, grievance redressal, and IT/IS policies.
RBI / MCA Filing
Online application to RBI (COSMOS) for NBFC-MFI, or Section 8 license application with MCA.
Fit & Proper & Diligence
Director & promoter due diligence, Fit & Proper declarations, and documentation pack.
Post-Registration Setup
Bank account, LMS selection, team hiring, branch setup, and onboarding into RBI return cycle.
Key Eligibility Requirements
Registered Company
Must be a company incorporated under the Companies Act, 2013 (private or public limited / Section 8).
Net Owned Funds
Minimum NOF of ₹10 crore for NBFC-MFI, verified through banker’s certificate.
Qualifying Asset Ratio
At least 85% of net assets in qualifying MFI loans to low-income households.
Clean Directors
Directors and promoters with clean records and no adverse regulatory actions.
Fit & Proper Criteria
Directors must meet RBI’s Fit and Proper Criteria, with financial services experience.
Business Plan & Policies
Well-defined 5-year business plan, lending policy, and risk management framework.
Documents Required
Company & Corporate
- Certificate of Incorporation
- MOA & AOA with MFI objects
- Board resolution for MFI registration
- Shareholding pattern
- Latest audited financials
- NOF certificate & banker’s report
- Section 8 license (for NPO route)
Directors & Promoters
- PAN, Aadhaar, address proof
- Passport-size photographs
- Educational & professional qualifications
- Net worth certificate
- Fit & Proper declaration
- CIBIL and credit history report
- Experience in financial / social sector
Business Plan & Policies
- Detailed 5-year business plan
- Financial projections (P&L, BS, CF)
- Target borrower profile & geographies
- Credit, pricing & recovery policy
- FPC & grievance redressal
- KYC / AML / CFT policy
- IT / LMS & IS security policy
Registration Process for NBFC-MFI
1
Structuring
Select between NBFC-MFI and Section 8, design capital, and plan shareholding pattern.
2
Incorporation
Incorporate a private / public limited company with MFI objects and requisite capital.
3
NOF & Policies
Infuse NOF, obtain auditor / banker certification, and prepare policies & business plan.
4
COSMOS Filing
File online application on RBI’s COSMOS portal along with physical submission to regional RBI.
5
CoR Grant
Respond to RBI queries and supervisory review until Certificate of Registration is issued.
Why Register as a Microfinance Company
✓
Serve India’s vast financially excluded population
✓
RBI-regulated credibility as an NBFC-MFI
✓
Eligible for bank funding and NCDs
✓
Attract impact investors and social capital
✓
Combine measurable impact with financial returns
✓
Structured vehicle for co-lending and partnerships
✓
Strong regulatory fit for fintech-led MFIs
✓
Pathway to PE, VC, and strategic exits
Ongoing Compliance for NBFC-MFIs
Qualifying Asset Ratio
Maintain at least 85% of net assets as qualifying microfinance loans at all times.
RBI Returns
NBS-1, NBS-2, NBS-7, ALM, CRILC, and MFI-specific returns at prescribed intervals.
CRAR & Provisioning
Maintain capital adequacy and provisioning as per RBI microfinance norms.
Fair Practices Code
FPC compliance, loan card, key fact statement, and transparent pricing.
Borrower Indebtedness
Monitor borrower indebtedness and fixed obligation to income norms.
KYC & AML
Customer due diligence, PMLA reporting, and STR / CTR filings to FIU-IND.
Corporate Governance
Board meetings, committees, and SBR-layer governance requirements.
Annual Filings & Audit
MCA annual filings, statutory audit, ITR, and tax audit every financial year.
FAQs on Microfinance Company Registration
What is a microfinance company?
A microfinance company is a specialized lender that provides small-ticket, collateral-free loans to low-income households and self-employed borrowers who lack access to mainstream banking. In India, it can be set up as an NBFC-MFI regulated by the Reserve Bank of India or as a not-for-profit Section 8 Microfinance Company under the Companies Act, 2013.
What is the difference between NBFC-MFI and Section 8 microfinance?
An NBFC-MFI is a for-profit, RBI-regulated entity with a minimum Net Owned Funds of ₹10 crore and scalable operations, eligible for bank funding and external capital. A Section 8 Microfinance Company is a not-for-profit entity with limited scale, no profit distribution to promoters, and MCA oversight — suitable for small, mission-driven operations rather than institutional lending.
What is the minimum capital required for an NBFC-MFI?
An NBFC-MFI requires a minimum Net Owned Funds of ₹10 crore, to be achieved in line with RBI-notified timelines. The capital must be genuine, traceable to proper sources, and supported by banker’s and auditor’s certificates at the time of RBI application.
What is the 85% qualifying asset rule?
Under RBI’s microfinance regulations, an NBFC-MFI must maintain at least 85% of its net assets as qualifying microfinance loans — small-ticket, unsecured loans to low-income households meeting prescribed criteria. Failure to maintain this ratio can result in loss of MFI status and additional regulatory consequences.
How long does NBFC-MFI registration take?
A well-prepared NBFC-MFI application typically takes 4 to 6 months from filing to CoR grant, depending on completeness of documentation, RBI’s queries, and background verification of promoters. Delays usually arise from weak business plans, insufficient documentation, or promoter profile gaps.
Can foreign investors invest in NBFC-MFIs?
Yes. 100% FDI is allowed in NBFC-MFIs under the automatic route for specified financial activities, subject to minimum capitalization norms under the FDI policy. FEMA compliance, FC-GPR filings, and pricing guidelines are mandatory for every foreign investment round.
Can we start lending before receiving the CoR?
No. A company cannot commence financial business as an NBFC-MFI without a valid Certificate of Registration from RBI. Lending prior to CoR is a violation of Section 45-IA of the RBI Act and may attract severe penalties, criminal prosecution, and forced closure of business.
What are the key ongoing compliances for an NBFC-MFI?
Core compliances include maintenance of 85% qualifying assets, CRAR, periodic RBI returns, Fair Practices Code, borrower indebtedness limits, KYC/AML, PMLA reporting, MCA filings, statutory audit, income tax, GST, and adherence to the Scale-Based Regulatory (SBR) framework along with digital lending guidelines where applicable.
Build a Regulator-Ready Microfinance Business
Partner with our experts for end-to-end MFI registration — structure selection, incorporation, RBI / MCA filing, and compliance setup — under one roof.
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