RBI Micro Finance Company Registration | Advisory on MFI Businesses


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NBFC Micro Finance Registration Registration

The term “micro finance” means various types of financial services such as credit, savings, micro-insurance, remittances offered to low income population. The main purpose is to provide permanent access to financial services which include insurance, savings and fund transfer to people with low income and in rural and semi-urban areas. Micro Finance Companies are a great support to rural and agricultural development and income and employment generation. Microfinance is defined by NABARD as “provision of thrift, credit and other financial services and products of very small amounts to the poor in rural, semi-urban and urban areas provided to customers to meet their financial needs; with only qualification that (1) transactions value is small and (2) customers are poor.” Micro Finance Business can be registered in different forms as NBFC MFI (Registration with RBI) OR Section 8 Company (Registered under Companies Act 2013)

Many Micro finance institutions are obtaining Non-banking finance company (NBFC) status from RBI to get wide access to funding, including bank finance.


NBFC-MFI is a non-deposit taking NBFC (other than Section 8 company) having minimum net owned fund of Rs 5 crores (if registered in the North Eastern Region- Rs 2 Crores) * and shall not have less than 85% of its assets in the nature of qualifying assets meeting the following criteria:

  • iconLoan disbursed by an NBFC-MFI to a borrower with rural household annual income not exceeding Rs. 1,25,000 or urban and semi-urban household income not exceeding Rs 2,00,000;
  • iconLoan amount does not exceed Rs 75000 in the first cycle and Rs 1,25,000 in subsequent cycles;
  • iconTotal indebtedness of the borrower does not exceed Rs 1,25,000;
  • iconTenure of the loan not to be less than 24 months for loan amount in excess of Rs 30000 with prepayment without penalty;
  • iconLoan to be extended without collateral;
  • iconAggregate amount of loans, given for income generation, is not less than 50 percent of the total loans given by the MFIs;
  • iconLoan is repayable on weekly, fortnightly or monthly instalments at the choice of the borrower.

After satisfying the following conditions, any Non-Banking Financial Company can operate as Micro-Finance Institution. A Non-Banking Financial Company (NBFC) not meeting the above criteria, shall not have more than 10% of its total assets as loans.

* SCALE BASED REGULATION(SBR); A Revised Regulatory Framework for NBFCs:

To tighten strict control over NBFCs, RBI has prescribed Guidelines on Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs on 22nd October 2021 which will be effective from 01st October,2022. Regulatory minimum Net Owned Fund (NOF) for NBFC-MFI shall be increased to ₹10 crore. The following is prescribed for the existing NBFCs to achieve the NOF of ₹10 crore:


Current NOF

By March 31, 2025

By March 31, 2027


₹5 crore (₹2 crore in NE Region)

₹7 crore (₹5 crore in NE Region)

₹10 crore

Documents Required for NBFC Micro Finance Registration

Firstly, a company has to be incorporated under the Companies Act, 2013. The company may be a private company or a public company. Secondly, after incorporation, the company has to register itself with the Reserve Bank of India, since a Micro Finance Institution (hereinafter referred to as MFI) is regulated by the Reserve Bank of India.

The list of documents to be filed with RBI for registration are given below:

Sr. No.

Requirements to be complied with and documents to be submitted to RBI by Companies for obtaining certificate and Registration from RBI as NBFC


Certified copies of Certificate of Incorporation and Certificate of Commencement of Business in case of public limited companies.


Certified copies of extract of only the main object clause in the MOA relating to the financial business.


Board resolution stating that:

a)     the company is not carrying on any NBFC activity/stopped NBFC activity and will not carry on/commence the same before getting registration from RBI

b)     the company has not accepted any public deposit, in the past (specify period)/does not hold any public deposit as on the date and will not accept the same in future without the prior approval of Reserve Bank of India

c)      the UIBs in the group where the director holds substantial interest or otherwise has not accepted any public deposit in the past /does not hold any public deposit as on the date and will not accept the same in future

d)     the company has formulated “Fair Practices Code” as per RBI Guidelines


Copy of Fixed Deposit receipt & Bankers certificate of no lien indicating balances in support of NOF


For companies already in existence, the Audited balance sheet and Profit & Loss account along with directors & auditors report or for the entire period the company is in existence, or for last three years, whichever is less, should be submitted


Copy of the certificate of highest educational and professional qualification in respect of all the directors


Copy of experience certificate, if any, in the Financial Services Sector (including Banking Sector) in respect of all the directors


Banker’s report in respect of applicant company, its group/subsidiary/associate/holding company/related parties, directors of the applicant company having substantial interest in other companies. The Banker’s report should be about the dealings of these entities with these bankers as a depositing entity or a borrowing entity.

Note: Please provide bankers report from all the bankers of each of these entities and provide the report for all the entities. The details of deposits and loans balances as on the date of application and the conduct of the account should be specified.

In addition to the Documents required for registration as Type II - NBFC-ND, following list of documents / information to be submitted by the NBFC-MFI applicant:

  • iconBoard resolution stating that:
  • iconthe company will be a member of all the Credit Information Companies and will be a member of at least one Self-Regulatory Organisation.
  • iconthe company will adhere to the regulations regarding pricing of credit, Fair Practices in lending and non-coercive method of recovery as per RBI Guidelines.
  • iconthe company has fixed internal exposure limits to avoid any undesirable concentration in specific geographical locations.
  • iconthe company is not licensed under Section 25 of the Companies Act, 1956 / Section 8 of the Companies Act, 2013.
  • iconRoadmap for achieving 85% qualifying assets.

Procedure For Registration Of NBFC-MFI With Rbi:

Sr. No





The first step is to form a New Company registered under the Companies Act 2013. The name must reflect the character of an NBFC. Words such as Finance, Investment, Finvest, Finstock, etc. may be used as part of the name. In general, RBI does not allow names which are not reflecting the characteristics of NBFC.



The requirement of Minimum Net Owned Fund has been increased from Rs 2 Crores to Rs 10 Crores (Vide RBI Circular DOR.CRE.REC.No.60/03.10.001/2021-22dated 22nd October 2021. It must be ensured that the Authorised Capital of the NBFC is not less than Rupees Ten Crores.

After the incorporation of a new Company the Paid-up Equity Capital of the Company should suitably rose either at par or premium so as to attain a minimum Net Owned Fund. The Capital to be raised here should be Equity Share Capital and not Preference Share Capital. RBI vide its Notification dated 22nd October 2021, has brought changes in regulatory minimum net owned fund (which shall be effective from 01st October 2022)


Current NOF

By March 31,2025

By March 31,2027


₹2 crore

₹5 crore

₹10 crore


₹5 crore (₹2 crore in NE Region)

₹7 crore (₹5 crore in NE Region)            

₹10 crore


₹5 crore

₹7 crore

₹10 crore

But for NBFC-P2P, NBFC-AA, and NBFCs with no public funds and no customer interface, the NOF shall continue to be ₹2 crore. Also, there is no change in the existing regulatory minimum NOF for NBFCs - IDF, IFC, MGCs, HFC, and SPD.

The Net Owned Funds would be calculated based on the last audited balance sheet of the Company. Net owned Fund will consist of paid up equity capital, free reserves, balance in share premium account and capital reserves representing surplus arising out of sale proceeds of assets but not reserves created by revaluation of assets. From the aggregate of items will be deducted accumulated loss balance and book value of intangible assets, if any, to arrive at owned funds. Further, investments in shares of other NBFCs and in shares, debentures of subsidiaries and group companies in excess of ten percent of the owned fund mentioned above will be deducted to arrive at the Net Owned Fund.



The entire sum of Rs 2 crores should be kept in a bank in a Deposit Account free from all liens. Normally funds are kept in Fixed Deposit. The RBI at the time of considering the application for the grant of Certificate of Registration verifies the deposits held by the Company with the Bankers.



a)     The applicant Company is required to apply online and submit a physical copy of the application along with the necessary documents to the Regional Office of the Reserve Bank of India. The application can be submitted online by accessing RBI’s secured website https://cosmos.rbi.org.in. At this stage, the applicant company will not need to log on to the COSMOS Application and hence user ids are not required.

b)     The company can click on “CLICK” for Company Registration on the login page of the COSMOS Application. A window showing the Excel application form available for download would be displayed.

c)      The company can then download suitable application form (i.e NBFC or SC/RC) from the above website, key in the data and upload the application form.

d)     The company may note to indicate the correct name of the Regional Office in the field “C-8” of the “Annex-Identification Particulars” in the Excel application form.

e)     The company would then get a Company Application Reference Number for the CoR application filed on-line. Thereafter, the company has to submit the hard copy of the application form (indicating the online Company Application Reference Number) along with the supporting documents, to the concerned Regional Office. The company can then check the status of the application from the above-mentioned secure address, by keying in the acknowledgement number.



In addition to the documents required to be enclosed along with Application Form, the following should also be enclosed:

a)     Copy of E-Form Spice 32

b)     Experience Certificate or Details of Experience of Directors, if any, in NBFC Business

c)      Banker’s Report in the format prescribed by RBI with the request to Bank that original should be directly sent to RBI

d)     Banker’s Report of all the Firms/Company/Proprietorship Concern in which the director holds substantial interest

e)     Board Resolutions in the matter of Application for granting Certificate of Registration, Non-Acceptance of Public Deposits and Non carrying business of Non-Banking Financial Institution without Certificate of Registration.

f)       Board Resolution adopting a Fair Practices Code and a copy of the said Code.

g)     Declaration from Directors to give effect that they are not associated with unincorporated bodies u/s 45-S of RBI Act,1934

The application is to be filed with the Regional Office of RBI whose jurisdiction; the registered office of the Company falls.



After the same is filed, the same is examined by RBI and further documents and clarifications may be sought from time to time. Finally, if RBI considers that the application is complete in all respects and all required formalities and compliances are met, the RBI issues Certificate of Registration.

Features Of Micro-finance Institution:

  • iconMicro Finance grants financial services to low income group.
  • iconSize of the loan given by MFI is small.
  • iconRepayment period of the loan is small.
  • iconNo requirement of Collateral security
  • iconConcept of Self-Help Group (SHGs) is the most exciting discovery in the context of microfinance.
  • iconThe end use of the loan is flexible
  • iconLoans given are mostly group loans, trickling down to individuals.
  • iconTransaction cost is low, due to group lending.