Frequently Asked Questions about Micro Finance Company registration in India
FAQ about Micro Finance Company Registration in India
1. What is a micro finance company?
A micro finance company is a financial institution that provides small loans and other financial services to low-income individuals or groups who do not have access to traditional banking facilities. These services aim to promote entrepreneurship, alleviate poverty, and empower marginalized sections of society.
2. Why should I register a micro finance company in India?
Registering a micro finance company in India provides legal recognition and credibility to your business. It allows you to access various government schemes and subsidies available for micro finance entities like priority sector lending, refinancing facilities, and tax benefits. Furthermore, registration enhances your company's reputation and helps establish trust among potential investors and clients.
3. What are the requirements to register a micro finance company in India?
To register a micro finance company in India, you need to meet certain criteria outlined by the regulatory authority, which is the Reserve Bank of India (RBI). These include having a minimum net owned fund of Rs. 5 crore, having suitable infrastructure for providing services, and having a team with relevant experience in micro finance. You will also need to submit various documents, such as the company's Memorandum and Articles of Association, business plan, and projections.
4. How long does the registration process take?
The registration process for a micro finance company in India typically takes around 3-6 months, depending on the completeness of your application and the efficiency of the regulatory authority. It involves a thorough evaluation of your business plan, financial projections, and compliance with the relevant regulations. It is advisable to seek professional assistance to ensure a smooth and timely registration process.
5. Can foreign entities register a micro finance company in India?
Yes, foreign entities are eligible to register a micro finance company in India. However, they need to adhere to specific guidelines and regulations set by the RBI for foreign direct investment (FDI) in the micro finance sector. These guidelines include limits on FDI, source of funds, and compliance with anti-money laundering laws.
6. Are there any ongoing compliances after registration?
Yes, after registration, micro finance companies in India are required to comply with various ongoing obligations. These include submission of periodic reports to the RBI, maintenance of proper books of accounts, conducting annual audits, and compliance with anti-money laundering and know-your-customer norms. It is essential to stay updated with any changes in regulations that may impact your business operations.
7. Can a micro finance company accept deposits from the public?
No, micro finance companies in India are not authorized to accept deposits from the public. They can only raise funds through equity, venture capital, bank borrowings, or other approved sources. The RBI has specific guidelines to ensure the protection of the public's interests and prevent fraudulent activities in the micro finance sector.
8. Is there any financial assistance available for micro finance companies in India?
Yes, micro finance companies registered with the RBI can avail themselves of financial assistance from various sources. This includes refinancing facilities from specialized banks like the National Bank for Agriculture and Rural Development (NABARD), priority sector lending from commercial banks, and government-sponsored schemes for promoting micro finance activities.
9. Can a micro finance company provide other financial services apart from loans?
Yes, micro finance companies in India can provide additional financial services such as insurance, savings products, remittance services, and financial literacy programs. These services are aimed at enabling financial inclusion and providing a holistic approach to the economic empowerment of underserved populations.
