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22 July 2023
The Reserve Bank of India has allowed a specific type of company to fix interest on loan rates. For sure, this is none other than a Section 8 Microfinance company.
Actually, microfinance companies provide financial services and aid to low-income individuals and small businesses, helping to promote economic development and alleviate poverty. In order to operate legally, microfinance companies must register with the appropriate regulatory authorities.
Here are the steps involved in the registration process for a microfinance company in India:
Step 1: Obtain Digital Signature Certificate (DSC)
The first step starts with obtaining a digital signature certificate (DSC) for the company directors. For its registration, you need to hire a consultant having expertise in registering Section 8 micorfinance companies. This is necessary to file electronic documents with the Ministry of Corporate Affairs (MCA).
Step 2: Obtain Director Identification Number (DIN)
Next, the company directors must obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA). This is a unique identification number required for all directors of Indian companies, as per the rules.
Step 3: Obtain Name Approval
For the name to be known, the next step is mandatory. It is to obtain name approval for the microfinance company from the MCA. The name must be unique and not already registered by another company.
Step 4: Drafting of Memorandum of Association (MOA) and Articles of Association (AOA)
The MOA and AOA are must-have legal documents. These documents define the purpose, prospectus, and rules of the company. These documents must be drafted and filed with the MCA.
Step 5: File the Incorporation Documents
The incorporation documents, including the MOA, AOA, and application for incorporation, must be filed with the MCA. It ensures that you have submitted your documents for verification with the MCA.
Step 6: Obtain the Certificate of Incorporation (COI)
If the incorporation documents are in order and valid, the MCA will issue a Certificate of Incorporation (COI), indicating that the microfinance company is now registered and legally able to operate.
Step 7: Obtain a Permanent Account Number (PAN) and Tax Account Number (TAN)
Once the COI is procured, the microfinance company must apply for a Permanent Account Number (PAN) and Tax Account Number (TAN) from the Income Tax Department.
Step 8: Obtain Registration with the Reserve Bank of India (RBI)
Finally, the microfinance company must register with the Reserve Bank of India (RBI) as a non-banking financial company (NBFC) in order to operate as a microfinance institution. This involves submitting an application and meeting certain requirements related to capital, management, and operational procedures.
In the nutshell, the prospective startup should be ready with these documents:
Fee to Register MFIs
Fees involved in the registration process may vary based on the services offered by the consultancy firms or legal services. It is recommended to check the fees with the respective government agencies' websites and consult with a professional consultant to register a Section 8 microfinance company, let’s say, or where you live to ensure all requirements are met.
There is another point that is worth considering. It is related to the fee of registering a Section 8 microfinance company in India, which may vary depending on various factors such as the state in which the company is being registered, the size of the company, the professional fees charged by the consultants, and any other miscellaneous expenses.
However, the basic fees involved in the registration process include government fees for obtaining a Digital Signature Certificate (DSC), Director Identification Number (DIN), name approval, and Certificate of Incorporation (COI). These fees may range from approximately INR 5,000 to INR 2+ lakhs. It completely depends on the authorized capital of the company, which may start from one lakh to over a crore.
Additionally, there may be fees for drafting the Memorandum of Association (MOA) and Articles of Association (AOA), as well as for obtaining a Permanent Account Number (PAN) and Tax Account Number (TAN). These fees may start from approximately INR 5,000.
Furthermore, the registration with the Reserve Bank of India (RBI) as a non-banking financial company (NBFC) involves meeting certain capital and operational requirements, which may incur additional costs.
It is recommended to consult with a professional or a registered consultancy firm for a more accurate estimation of the cost involved in registering a Section 8 microfinance company in India.