Introduction:
In terms of Section 45-IA of the RBI Act, 1934, no Non-banking Financial company can commence or carry-on business of a non-banking financial institution without a) obtaining a certificate of registration from the RBI.
However, in terms of the powers given to the Bank, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking companies registered with SEBI, Insurance Company holding a valid Certificate of Registration issued by IRDA, Nidhi companies, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982, Housing Finance Companies regulated by National Housing Bank, Stock Exchange or a Mutual Benefit company.
Types of Finance business without RBI Approval:
Following are the types of Companies to run a finance business without RBI approval,
1. Nidhi Company
2. Microfinance – Under Section 8 Company
Nidhi Company
Nidhi Company refers to a type of NBFC (Non-Banking Financial Corporation) which is regulated and governed by the provisions of the Companies Act, 2013. However, RBI has excused this Company from the core provisions of the RBI Act, 1934 and other regulations prevalent on an NBFC, as these Companies deals only with the money of its shareholders or members.
Requirement to open a Nidhi Company:
Minimum 7 Shareholders
Minimum 3 Directors
Minimum of Rs. 5 Lac is needed as Capital Requirement
Main objective is to inculcate the habit of saving in its members
A minimum of 10 Equity Shares or shares corresponding to Rs. 100 should be issues to each deposit holder.
Steps to incorporate a Nidhi Company:
Obtain Digital Signature Certificate for all the members
First step is to obtain the DSC and Din for Directors
Apply for Director Identification Number
The next step is to get DIN, DIN is an identification number required by every director. It is mandatory for all the directors in the company.
Apply for Name Approval
the next step is to file for Company Name approval.
Drafting of various documents
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Affidavits for company registration
- CA declaration
- All KYC documents of directors
- Additional undertakings
Filing of Documents with Registrar of Companies for Incorporation
The company incorporation is filed online through E-form SPICE+ on MCA Portal. This form is the single integrated form for company registration.
Generation of Certificate of Incorporation
Once the Form get approved the Incorporation certificate is generated online along with PAN and TAN. However, the hard copy is delivered within 15 days at the registered office address of the Company
Microfinance – Under Section 8 Company
Section 8 – Microfinance company works completely like a NBFC but it does not need any RBI approval, there is no minimum capital requirement for this type of company and most importantly, central government approves this company to work in the area of finance, hence, a 100% legal company.
Loan Limits by Section-8 Micro Finance Company:
Here are basic features of registering Micro-finance company through section 8:
- RBI approval is not required at all.
- No minimum funds of 2 cr.
- The registration cost is under Rs.47,000/-
- Lesser compliances as compared to the NBFC
- Can give unsecured loan to small business of Rs.50,000
- Can give loan for dwelling residence up to Rs.1.25 lakh.
- Total indebtedness of the borrower will not exceed Rs. 1,00,000.
- Tenure of the loan not to be less than 24 months for loan amount in excess of Rs. 30,000 with prepayment without penalty.
- Loan is repayable on weekly, fortnightly or monthly installments at the choice of the borrower.
Steps to Incorporate Section 8 Microfinance Company:
Obtain Digital Signature Certificate for all the members
First step is to obtain the DSC and Din for Directors
Apply for Director Identification Number
The next step is to get DIN, DIN is an identification number required by every director. It is mandatory for all the directors in the company.
Apply for Name Approval
the next step is to file for Company Name approval.
Drafting of various documents
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Affidavits for company registration
- CA declaration
- All KYC documents of directors
- Additional undertakings
Filing of Documents with Registrar of Companies for Incorporation
The company incorporation is filed online through E-form SPICE+ on MCA Portal. This form is the single integrated form for company registration.
Generation of Certificate of Incorporation
Once the Form get approved the Incorporation certificate is generated online along with PAN and TAN. However, the hard copy is delivered within 15 days at the registered office address of the Company.
Author Bio
