Overview

• A microfinance company is a financial institution that provides small scale financial services in the form of loans, loans or savings. These companies are started to make the loan system easier for small businesses as they do not get loans from banks due to their complex method. Therefore, it is usually designated as a micro-credit company or organization. They provide small loans to many small businesses or families that do not even have formal business channels or eligibility for loans.

• They give small loans which are less than Rs 50,000 for rural areas, and for urban people, it is Rs 1,25,000. The easiest way to register a micro finance company in India is to register a Section-8 company by MCA (Ministry of Corporate Affairs). Externally charging any marginal money or ensuring security. It can provide loans at reasonable rates as directed by the RBI and the central government. They are the broad support for all rural and agricultural development, including income and employment generation. There are two types of microfinance organizations allowed in India; One that has to be registered with the RBI, and added is the non-profit type, which is listed as a Section 8 company and does not get RBI approval.

• Microfinance institutions provide financial services such as loans, savings and insurance to the needy personalities of the society and small business contractors who would not be able to pass for a standard bank loan.

Key Features

• Microfinance institutions should be incorporated as per Companies Act 2013 or 1956.
• Before starting operations, they must have a minimum value specified by the authority.
• They must obtain the necessary license or permit.
• They are involved in financing small quantities of needy frames of the society.
• Provide banking assistance in small monetary amounts
• To provide financial assistance to persons working in various trades such as 'transportation,' 'fishing,' 'carpenter,' etc.
• Provide financial assistance to small enterprises, which cannot afford any leveling
• Increased participation of women in creating sustainable livelihoods
• Provide access to quality healthcare
• Increase and enrich the way of maintenance for low-income individuals and create self-employment opportunities

Important Points

There are mainly two methods for registering Micro Finance Institution. One way is to create a company and then apply to the RBI for support. The minimum requirements for a microfinance company are a net owned fund of Rs 5 crore and active sketches of the promoters. The second way is to register a section 8 company.. 

• Required for business purposes and the highest is Rs. 50,000 and Rs 1,25,000 for domestic accommodation. Can be given.
• At least the need for net controlled funds.
• There is no need for RBI support / approval since RBI is exempted from registration and certain conditions.

Non-RBI approval

In India, finance institutions are authorized only for non-banking finance companies (NBFCs) and regulated by the RBI. However, some business forms have been granted immunity by the 'Reserve Bank of India' (RBI) to carry out banking activities to a certain extent. The RBI by its chief circular: "RBI/2015-16/15 DNBR (PD) CC.No.052/03.10.119/2015-16" Dated July 01, 2015, has published all Section 8 Companies involved in microfinance activities.

Receipt of securities

• It is not advisable to accept deposits under Section 8 Company. In addition, the company will have to raise its funds further and start its own microfinance company. In addition, the company can raise funds using contributions in the form of donations.

• Even if you plan to register an NBFC company and are available to invest Rs.5 crore in the business, then securities are also not allowed to be used. According to the RBI scheme, firstly, you expect to register a NBFC non-deposit taking company and, as a result, ask the Reserve Bank of India (RBI) for the status of taking the deposit.

Micro-credits helping micro finance company

Loans under microfinance companies are not very confusing. Most unsecured loans are offered and are against monthly payments or weekly payments.. 

• NBFC may force differential rate of interest to its consumers, but the correction should not exceed 4%.
• Microfinance companies for presenting in all offices or literature, reasonable rate of interest.
• Companies should introduce a loan card for all members announcing interest rates with different tax rates
• Loans are also given to self-help groups and other link programs.
• If no payment is received within 90 days, the counterpart should be treated as a non-performing asset, leaving only Section 8 companies.

Mandatory Complaints

Micro finance company has the lowest compliance to comply. However, the most important adjustments are as follows:

• RBI Compliance:

  The company is advised to follow RBI norms even though it is not necessary to register with the Reserve Bank.

• Companies Act:

  Section 8 company is also required to comply with the Companies Act, similarly, other companies.

• Supplement:

  There are also many laws which PMLA etc. should be taken care of when it comes to mandatory compliance.

Type of legal structure for microfinance company registration ->

Required Documents

• Duplicate copy of 'Incorporation of a company's certificate'.
• Certified copy of the company's 'Memorandum and Articles of Association' (MOA & amp; AOA)
• Proposal of the Board in relation to the proposed 'Microfinance Company Registration'
• Banker's Report
• Report of the auditors regarding the receipt of 'minimum net ownership fund (NOF) of the applicant company
• 'Chartered Accountant' certificate regarding details of investment in other 'NBFCs' as well as details of members of companies, as shown in 'Performa Balance Sheet'
• Certified copy of the required and highest academic and professional qualifications of all proposed directors of an applicant company.
• PAN Card: In case of Indian citizens, PAN card of shareholders and directors. & nbsp;
• Passport size photograph: More than ten months old photograph of directors and shareholders
• ID Proof: Aadhaar Card / Voter ID Card / Passport / Driving License Copy of Directors and Shareholders.
• Rent Agreement: If you have a property for rent, a copy of the rent agreement
• Address proof: electricity bill, water bill, bank statement, gas or telephone bill of shareholders and directors
• Registered office proof: Electricity bill, water bill, bank statement, gas or phone bill of registered office address
• NOC from owner: No objection certificate from owner of registered office is required
• KYC / Income Proof of Director
• Proof experience in the financial sector of the business
• Directors' recent credit report
• Net worth certificate of directors
• Detailed action plan about products and risk assessment policy
• Organization Structure Plan

Some important points related to income recognition under GST

• Account and Finance

  'Place of supply' will be the position of recipient of services on the listed record of 'supplier of services'. In a digitized and centralized situation in India, it will be quite difficult to identify the location of the service receiver. In cases where service receivers, like professionals, manufacturers, traders and other workers, often move from one place to another in search of better opportunities. The service provider may have a separate address, namely permanent address, current address, communication address and KYC address.

• Non-Account and Finance

  Here the place of supply of service will be the location of service provider. This would again affect companies that are widespread in remote areas to establish their presence but operate and transact from back-offices located in another state.

• Working demand

  Actionable claims do not constitute service under service tax, and therefore no tax is payable under the current regime. Under GST, actionable claims are now included in the definition of supply of goods. Services provided from exempted bills will now be taxed as an impact B2C and B2B.

Benefits

• For microfinance institutions in India, the Reserve Bank of India has formulated a policy framework to provide necessary legitimacy to the sector.

   

  • It helps in promoting self-reliance and business start-ups
  • Easy way to get
  • Improved overall loan repayment rate related to general traditional banks.
  • It helps to enhance the financial condition by fulfilling loans for various types of loans such as emergency loans, business loans, working capital loans, housing loans etc.
  • There is no minimum capital of 5 Cr
  • No RBI approval
  • The easiest way to start a finance business is
  • It can charge up to 26% interest rate.
  • Promoting socio-economic growth: 
  • Offers reasonable services for small businesses: 
  • Minimum Compliances: 

  Procedure

  • Company registration with SPICe + Form
  • Initially, in MFI-Microfinance Institution, it has to register a company as a 'Private Limited Company' or 'Public Limited Company' as per 'Companies Act, 2013'. The company can be nominated for a capital of Rs 1,25,000.
  • SPICE Plus serves many requirements like name reservation, incorporation, DIN allocation, PAN, TAN, EPFO, ESIC, Professional Tax (Maharashtra) compulsory issue and opening of bank account and getting GSTR through SPICE + form . li>

  Part A –: Name Reservation (New Companies only)

  Part B:

  • Company Incorporation
  • Application for DIN
  • PAN application
  • TAN Application
  • GSTIN Application
  • EPFO Registration
  • ESIC Registration
  • Opening a bank account for the company
  • Professional Tax Registration (Maharashtra only)

  Step-by-step process

  • Click ‘SPICe+’ placed under ‘MCA Services’.
  • After that Choose ‘New Application;
  • Existing application, you can prefer ‘Existing Application’, fill in the application number with the proposed or approved name. Click ‘Type of Company’
  • Click ‘Class of Company’, and the ‘Category of Company’'
  • Click ‘Sub-Category of Company’ 
  • Next, you have to specify the ‘Main division of industrial activity of the Company’
  • Next, you have to mention the ‘Main division of industrial activity of the Company’
  • Next you have to provide details of the ‘proposed or approved name’. Click the ‘Auto-check’ to in accordance with the rules administering the name. Submit the ‘Part A’ for reservation of name or proceed with the incorporation.
  • Part B has different sections for ‘check form’ for each section.

  Details required for registration

  • Location of the company's registered office
  • Directed Directors and Clients
  • Company Resources
  • Learn to apply for tax registration like PAN and TAN
  • Carry out a ‘pre-scrutiny’ check. A confirmation is presented upon successful submission of the form.
  • Download the proposed Part B PDF to paste from DSC and fill in any linked form with Part B. The forms associated with SPICE + are Agri-PRO, SPICE + Mo and SPICE + AOA, URC-1 and INC-. 9. SPICe + and Part B of linked forms can then be uploaded to the MCA portal. A service request number is prepared to pay for the private limited company incorporation. Once the payment is successful, the forms will be processed.

  In the case where any error being flagged on processing requires the form to be resumed, the SPICe + form has to be resubmitted in the same manner

  • Raise Capital

    The second thing is that the accepted and paid-up share capital should be raised to Rs. To extend to 5 crores 'or' Rs. 2 crores' whatever the case may be. It should be raised solely as 'equity share capital' and not as subjective share capital.

  • Bank Account

    'No Lien' certificate will be obtained from the bank. This certificate will be associated with an application which will be presented to the RBI.

  • Application to RBI for micro-finance company registration

    Further, it is to obtain all the certified copies and present them with the RBI for enterprise operations. The following deposit is required:

    copy of certificate of incorporation

    Text of main object segment in MOA and AOA.

    Copy of Fixed Deposit Receipt.

    Bankers' certificate certifying a lien with respect to the net owned fund

  • Filling the online form

    An online application will be filed, which includes RBI for microfinance company registration. After listing an application, the company will get a 'Company Application Reference Number'.

  • Hard copy mobility

    After filling the online application, a hard copy of the certificate along with the required documents has to be submitted with the Regional Office of the Reserve Bank of India. On hosting the application, RBI will direct due diligence, and after satisfaction, RBI will issue a certificate of starting a business.

  Some fetures of micro-finance company

  • Due to an outrage in the microfinance industry, there was a marked improvement in the way things operated in the 2010 business. The change was made to give a positive outlook for the microfinance sector. Millions of defaulters were noted, where the loan was valued at thousands of crores.
  • The Reserve Bank of India directed an initiative to set up a regulation where it gave credit bureaus the purpose of supporting FFI. Therefore, the services of credit agencies were limited to providing information to MFIs and consumers; It asked branches to give unplanned loans with value-added results and to stop MFIs.

  GST Response on MFI-NBFC

  • Unlimited number of departments

    Currently, an NBFC, banks, with pan-India operations, can make their service tax agreements through a single 'centralized' registration. Nevertheless, under GST, such as banks / NBFCs have to purchase a separate certification for each state where they operate.

    In complement to the registration, the compliance obligation regarding filing returns has also increased considerably.

  • Input-tax-credit panorama

    Currently, banks and NBFCs have chosen prominently for the possibility of a reversal of 50% of the 'CENVAT' credit received against the input and the input set. Conversely, CENVAT's credit on capital goods can be taken with cancellation conditions.

    50% of CENVAT credit is to be received on inputs, input services, and 'capital goods', supporting GST, which leaves them with a lower credit position of 50% on capital goods, thereby costing Capital increases.

  • Evaluation

    The evaluation will be done by the respective state regulators under which the special branch is registered. Now, each certified office of banks and NBFCs will have to maintain their position on rechargeability in different states and will have the objective of using input tax credit in different states.

    After GST, more than one assistant officer will be involved, and each domain can have a different mark on the same underlying issue. This inconsistency will, in view, continue the supporting process. Currently, a taxpayer is involved in a business by a unique advertising authority. It would be difficult to deal with and deal with the diversity of opinion provided by different auxiliary power.

  Servzone Procedure

  • Select 'Order' above.
  • Start with the required details and develop the application form.
  • Complete payment consideration.
  • We will file the requisite form electronically with Companies House to post or resign a director.
  • You will receive a notification that the appointment or resignation has been approved in the companies, a copy of your digital documents in 2-3 working days by email or post.