As per RBI Act 1934, companies registered under section 8 of Companies Act, 2013 are free/exempt from obtaining RBI approval for micro finance activities, in other words, companies registered u/s 8 carrying out the business/activity of micro finance to the poor section that can be individually or as Self-help groups for their betterment or for their upliftment without profit motive can give personal, business, education loan as limit specified under the Act.
As per Act, such activities are exempted to obtain RBI approval because there are some people who are unable to get loan from bank and other financial institutes, so to reduce poverty in India by carrying on the business of microfinance to the poor section who are unable to get loan from bank and for their betterment or upliftment, with NO PROFIT MOTIVE.
NO RBI APPROVAL REQUIRED FOR SECTION 8 MICROFINANCE COMPANY
In India, finance businesses are approved only to Non-Banking Finance Companies (NBFC). However, some business forms have been granted an exemption by the Reserve Bank of India (RBI) to do banking activities up to a specified limit. The RBI by it’s master circular: RBI/2015-16/15 DNBR (PD) CC.No.052/03.10.119/2015-16 Dated July 01, 2015, has released all the Section 8 Companies involved in microfinance activities and are exempt from the provisions of RBI Act, 1934
As per Para 2 (iii), Sections 45-IA, 45-IB, and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934) shall not apply to any non-banking financial company which is
(a) Engaged in micro financing activities, providing credit not exceeding Rs.50,000 for a business enterprise and Rs.1,25,000 for meeting the cost of a dwelling unit to any poor person for enabling him to raise his level of income and standard of living; and
(b) Companies registered u/s 8 of Companies Act, 2013
BEST FEATURE OF SECTION 8 MICROFINANCE COMPANY
There is not any capital limit for such company, company can be started with capital of INR 10,000 only.
Company can take interest up to 26% (2.75 times of average interest of top 5 banks)
It’s a legal finance business, you can sue if defaulter is not making payment on time.
Company can take loan from bank, financial institution and directors.
Company can give unsecured loan.
Author Bio
I had registered sec 8 company in the year 2019.Done activities lot for children .Niw we are planning to start micro finance for self help groups can we do it with same registeration or we have to do new one with Mimentioning micro finance
murali
Hi Bhupendra,
New registration is not possible as of now!
For more details you may connect @ +91-9672225555
Section 8 microfinance registration