Follow Us :

NBFC (MFI) Registration & Requirements

Micro finance is a source of financial services for entrepreneurs and small businesses, it is a type of Non-Banking Financial Company (NBFC) which is in a business of micro credit finance to individuals and small business. It is also known as Micro Finance Institution (MFI).

In india there are two type of business models for micro-finance activities:

1. NGOs Not for profit (Trust, Society, Section 8 companies)

(Find my article on section 8 company registration here : )

2. For profit (NBFC MFI)

Here we will discuss about NBFC MFIs Registration and Requirements:

What is NBFC ?

Non-banking financial companies are financial institutions that provide certain types of banking services, but do not hold a banking license. Non-Banking Financial Companies are companies registered under the Companies Act and engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.

According to Section 45I (f) of RBI act, 1934

‘‘Non-Banking Financial Company’’ means–

  • A financial institution which is a company;
  • A non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner;
  • Such other non-banking institution or class of such institutions, as the bank may, with the previous approval of the central government and by notification in the official gazette, specify.

“Therefore it is clear that NBFCs are need to be registered as a Company under Companies Act, 2013.”

“No company other than registered with Reserve Bank of India can do the business of Micro Finance Company.”

 Non-Banking Financial Company – Micro Finance Institution (NBFC-MFI)

NBFC-MFI is a non-deposit taking NBFC that fulfills the following conditions:

1. NET OWNED FUND: NBFC-MFIs require minimum net owned funds of Rs 5 crore. (For NBFC-MFIs registered in the North Eastern region of the country, the minimum NOF requirement is Rs 2 crore.)

2. Not less than 85% of its net assets are in the nature of “qualifying assets.”

3. Further the income an NBFC-MFI derives from the remaining 15 percent of assets shall be in accordance with the regulations specified in that behalf.

4. An NBFC which does not qualify as an NBFC-MFI shall not extend loans to micro finance sector, which in aggregate exceed 10% of its total assets.

5. “Net assets” are defined as total assets other than cash and bank balances and money market instruments.

“Qualifying asset” shall mean a loan which satisfies the following criteria:-

1. Loan disbursed by an NBFC-MFI to a borrower with a rural household annual income not exceeding Rs. 1,00,000 or urban and semi-urban household income not exceeding Rs. 1,60,000 ;

2. Loan amount does not exceed Rs. 60,000 in the first cycle and Rs. 1,00,000 in subsequent cycles;

3. Total indebtedness of the borrower does not exceed Rs.1,00,000 Provided that loan, if any availed towards meeting education and medical expenses shall be excluded while arriving at the total indebtedness of a borrower;]

4. Tenure of the loan not to be less than 24 months for loan amount in excess of Rs. 30,000 with prepayment without penalty;

5. Loan to be extended without collateral;

6. Aggregate amount of loans, given for income generation, is not less than 50 per cent of the total loans given by the MFIs

Procedure to Register the NBFC(MFI) in India

The requirement of RBI license make the NBFC registration process complex and time taking. The whole registration process could take couple of  months to complete.

As we know that NBFCs are need to be registered as a Company under Companies Act, 2013, so we need to incorporate a Company before applying to RBI for license.

If you are willing to incorporate a Private Limited Company for your microfinance business it will required at least 2 (Two) Members to start with.

In case of Public Limited Company you will required at least 7 (seven) Members for Incorporation.

Required  Documents :-

  1. Copy of PAN CARD
  2. Copy of Identity Proof ie. Voter ID/DL/Passport/Aadhar
  3. Copy of Address Proof ie. Bank Statement/Electricity Bill/Mobile Bill/Telephone Bill
  4. PHOTO
  5. Registered Office premises Rent Agreement or  Ownership Documents.
  6. Electricity Bill (Not older than two months)
  7. NOC from owner
  8. Other documents will be prepared by your corporate consultant

Process of Registration:

  1. Register a Company: We will require a company to register a Micro-finance NBFC, It could be a Public Limited Company or a Private Limited Company. We can register a private limited company with Rs. 1 lakh Capital and with 2 Members.
  2. Raise Capital: As per RBI guidelines and provisions we required minimum 5 Cr Net Owned Fund for NBFC(MFI) registration (For NBFC-MFIs registered in the North Eastern region of the country, the minimum NOF requirement is Rs 2 crore. We will raise Authorised and Paid up capital to 5 or 2 cr as per requirement.
  1. Fixed Deposit: Deposit the sum of Rs. 5 cr or 2 cr in bank as fixed deposit and obtain a certificate of no line from the bank.
  2. Apply RBI for License: We will fill an online application for NBFC registration with all required documents and a  hard copy of application with all documents to be sent to the regional office of Reserve Bank of India .

The article has been prepared considering the relevant Guidelines/Circulars/Notifications/Provisions of the RBI and Companies Act, 2013 and the rules made thereunder. Readers are requested to cross-check the provisions before acting upon the same. The author will not be liable for any damages or penalties caused.

About Author

Deepak Sharma is a Practicing Company Secretary at Jaipur (Rajasthan)  The author has written articles relating to corporate matters. Some of the articles have been published on Taxguru.

You can get in touch with me at

Feedbacks/Queries/Suggestions are invited.

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.


  1. RAJKIRAN K says:

    first of all thank you for sharing of information relating to NBFC-MFI. In that i have one doubt regards for utilisation of 15%of remaining assets, which are not included in 85%of qualifying assets, should NBFC MFI follow any RBI guidelines. If so, what are those guidelines?

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
June 2024