NBFC Micro Finance Institution Requirements & Registration

What is NBFC Micro Finance Institution

NBFC Microfinance institution (NBFC-MFI) is the financial institution in which a minimum net owned fund is Rs. 5 crores. But in the North Eastern region of the country, it is only Rs. 2 crore. 'Qualifying assets' are not less than 85% of its net assets.  The income of the NBFC-MFI extracts from the remaining 15 percent of assets shall be in accordance with the regulations specified in that behalf. NBFC which is not in the category of NBFC-MFI shall not allow extending loans to a microfinance sector that in aggregate exceed 10% of its total assets. The term net assets mean total assets other than cash and bank balances and money market instruments. In this article, we will let you know about the NBFC-MFI registration. How it could be done and what are the requirements of NBFC-MFI. For more details regarding NBFC Classification, compliances of NBFC you can follow our blog.

What is 'Qualifying asset'

Qualifying assets are defined as the loan disbursed by an NBFC-MFI  to a borrower with a rural household annual income not more than Rs. 1 lakh/ urban and semi-urban household income not more than Rs. 1 lakh 60 thousand. Besides, the amount of loan should not exceed Rs. 60000 in the first cycle and Rs. 1,00,000 in subsequent cycles. The total debts of the borrower shall not exceed Rs. 100000. Moreover, if any loan towards meeting education and medical expenses shall be not be included while arriving at the total debt of the borrower. The tenure of the loan must not less than 24 months for the amount in excess of Rs. 30000 with the prepayment without penalty. For income generation, the aggregate amount of loans must not lower than 50% of the total loans given by the MFIs.

Documents required for NBFC-MFI registration

Following are the documents which are required at the time of registration:

1. Copy of PAN CARD
2. Copy of Identity Proof that includes Voter ID/DL/Passport/Aadhar card
3. Copy of Address Proof means Bank Statement/Electricity Bill/Mobile Bill/Telephone Bill
4. Recent PHOTO
5. Registered Office premises Rent Agreement or  Ownership Documents.
6. Electricity Bill which should not older than two months
7. NOC from owner
8. Other documents will be prepared by your corporate consultant

In the case of a public limited company, there must be at least 7 members for the incorporation. While in case of private limited company there must be at least 2 members to start with.

Procedure for NBFC-MFI registration

There are steps that have to be followed while registering NBFC-MFI:

• Company register: Company registered under this category must be a public limited company or a private limited company. You can register a private limited company with having 1 lakh rupees only including two members.
• Capital raise: as prescribed by RBI, you must have minimum 5 crore rupees as a net owned fund for NBFC-MFI registration. you can raise authorized capital and paid-up capital to 5 or 2 crores according to the requirement.
• FD (Fixed deposit): you can deposit the amount of Rs. 5 or 2 crores in a bank as FD and can obtain a certificate of no line from the bank.
• Apply RBI for License: you can fill by online application for the registration of NBFC with the documents required. The hard copy of the application form must be submitted to the regional office of Reserve bank of India along with the documents.

  For further more information about Non-Banking Financial Company, regulations for NBFC, NBFC registration, you can directly visit our website: Legal Raasta Ring us on 8750008585 and send your query at Email: [email protected]

Related Articles: Procedure for Due Diligence of NBFC Buying and selling of NBFCs in India Ombudsman Scheme - NBFCs