The Legal Today
Micro Finance
Company Registartion Process
Step 1 -
Prepare DSC, DIN & Name Approval
Digital Signature Certificate (DSC)
Obtain a digital signature certificate for the proposed directors of the company. This is a mandatory requirement for filing forms electronically with the Registrar of Companies (ROC).
Director Identification Number (DIN)
Apply for DIN for all proposed directors. DIN is a unique identification number required for individuals who wish to become directors of companies in India.
Name Approval
Choose a unique name for your microfinance company that reflects your brand and purpose. You can file up to 6 names in order of preference through the RUN (Reserve Unique Name) form. The name should comply with the naming guidelines provided by the Ministry of Corporate Affairs (MCA).
Step 2 -
Apply for License
Prepare Application
Prepare the necessary documents for the license application. This includes detailed information about the company’s objectives, business plan, target market, and how you intend to carry out microfinance activities.
Form e-Form No. 12
File e-Form No. 12 (Application for License for Micro Finance Companies) through the Ministry of Corporate Affairs (MCA) portal. Attach all required documents as per the guidelines provided in the e-form.
Step 3
File for Incorporation
Memorandum of Association (MOA) and Articles of Association (AOA)
Draft the MOA and AOA of the company. The MOA outlines the company’s objectives, and the AOA defines its internal rules and regulations.
Form INC-32
File Form INC-32 (Simplified Proforma for Incorporating Company Electronically) along with the MOA and AOA. This form combines the application for DIN, reservation of company name, and incorporation.
Declaration and Attachments
Choose a unique name for your microfinance company that reflects your brand and purpose. You can file up to 6 names in order of preference through the RUN (Reserve Unique Name) form. The name should comply with the naming guidelines provided by the Ministry of Corporate Affairs (MCA).
Payment of Fees
Pay the prescribed fees for incorporation and other associated charges.
Registrar of Companies (ROC) Processing
The ROC will review your application and documents. If everything is in order, they will issue a Certificate of Incorporation.
Let's summarize the key points you've mentioned
Interest Charge
The average interest rate on loans provided by Microfinance Companies (MFIs) should not exceed 26%. This helps prevent excessive interest rates that could burden borrowers and lead to over-indebtedness.
Processing Charge
The processing charge levied by MFIs should not exceed 1% of the gross loan amount. This ensures that borrowers are not subjected to high upfront fees that could increase the cost of borrowing.
Insurance Premium
MFIs are allowed to charge only the actual cost of insurance for group, life, health, etc. They cannot add any extra charges beyond the actual insurance cost, in accordance with RBI policy.
Calculation of Interest Rate
The interest rates charged by MFIs should be calculated based on the lower of the following two criteria:
- Cost of funds plus a 12% margin, or
- Average base rate multiplied by 2.75.
- The average base rate is used as a benchmark for calculating the interest rate that can be charged by MFIs. The benchmark rate is derived from prevailing market conditions and is updated periodically.
- It’s important to note that these guidelines aim to strike a balance between the operational costs of microfinance institutions and the fair treatment of borrowers. The goal is to ensure that microfinance remains accessible and beneficial to individuals and small businesses in need, particularly those who lack access to traditional financial services.
- Since financial regulations and guidelines can change over time, it’s recommended to refer to the latest directives from the Reserve Bank of India (RBI) or relevant regulatory authorities for the most current and accurate information on interest rates and charges for Micro Finance Companies.
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