SECTION 8 MICRO FINANCE

Basic Plan


*Send Your Documents

Documents Required

1. KYC of at least 2 Person(PAN, Adhaar, Photo, Mobile, Email, Latest Bank Statements)
2. Company Name
3. Office Address Proof (Rent Agreemen/ Property Papers with electricity bill)

SECTION 8 MICRO FINANCE



 

Overview:

When you wish to start out a finance business to helping poor people and having in trouble stepping into RBI License, the one and only alternative is to form a section 8 microfinance company(earlier it was registered under section 25 of old companies act,1956)

Introduction:

Section 8 microfinance company is actually the financial institution that provides small-scale financial services within the type of loan, credit, or savings. These companies are introduced to ease the system for small businesses as they don't get a loan from banks because of their complex process. Therefore, it's commonly named a Microcredit, a Micro-benefit organization. They supply small loans to varied small businesses or households that do not have access to formal banking channels or eligibility for loans. 

 Section 8 Microfinance Company provides small loans that are Rs. 50,000 for rural areas and for urban it's Rs. 1,25,000.

The simplest because to register a Microfinance Company in India is to register the Section 8 companies with MCa( Ministry of Corporate Affairs) without charging any marginal money or guarantee security. It can give loans at inexpensive rates directed by the RBI and central government without the ired of RBI Approval. They're huge support to all or any or rural and agricultural development including income and employment creation.


There are basically 2 kinds of microfinance companies that are allowed in India, one is which possesses to be registered with the RBI and another is that the non-profit type, which is registered as section 8 microfinance company that doesn't need RBI approval.


 Main Features of Section 8 Microfinance Company:

1. RBI approval isn't required

2. No need for minimum capital of Rs. 2 Crores.

3. Minimum Compliances.

4.Can provide unsecured loans to small businesses of Rs. 50,000.

5. Can grant a loan for dwelling residence up to Rs. 1.25 lakh.

6. Section 8 company got to follow the RBI guidelines on the of interest and processing charges.

7. It is a legal finance business and you will sue the defaulter just in case of non-payment of the amount.

8. In India, finance vocations are authorized only to Non- Banking Finance Companies (NBFC) and governed by RBI. NBFCs are required to urge registration with RBI and comply with RBI guidelines. However, some business forms are given an exemption by the Reserve Bank of India(RBI) to undertake to finance activities up to a specific extent.

9. The Reserve Bank of India through its master circular RBI/2016/15 DNBR (PD)CC.No.052/03.10.119/2015-16 Dated 01 July 2015 has exempted all section 8 Companies engaged in microfinance activites.

10. As per Para 2(iii). Section 45-IA, 45/IB,and 45-IC of Reserve Bank of India Act, 1934 shall not apply to any non-banking financial vocation which is engaged in the below-mentioned activities.

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 worth of a dwelling unit to any poor person for enabling him to spice up his level of income and standard of living ; and

b) Licnensed under Section 8 of the Companies Act, 2013 ; and

c) Not accepting public deposits as defined in paragraph 2(1)(xii) of Notification No. 118/DG(SPT)-98 dated January31,1998.


Benefits of Section 8 Microfinance Company:

The government of India and therefore the Reserve Bank of India have created a conducive policy framework for microfinance institutions(MFIs) to supply necessary legitimacy and impetus to the world. The Subsequent is the advantage of Micro Finance Business.

a) provide access to funding

b) Encourage self-sufficiency and entrepreneurship

c) It offers a far better overall loan payment rate than traditional banking products.

d) Help in meeting credit needs for such a population range from emergency loans, consumer loans, commercial loans, capital loans, housing, etc.

 

Loan limits by section 8 Micro–Finance Company:

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 are getting to be eligible.

• Loan the amount won't exceed Rs. 60,000 within
the primary cycle and Rs. 1,00,000 in subsequent

cycles.

• The total indebtedness of the borrower won't
exceed Rs. 1,00,000.

• Tenure of the loan to not be but 24 months for
loan amount in additional than Rs. 30,000

with prepayment without penalty.

• Loan to be extended without collateral.

• Aggregate amount of loans, given for income
generation, isn't but 50 percent of

the total loans are given by the MFIs.

• Loan is repayable on weekly, fortnightly, or
monthly installments at the choice of the

borrower.

 

Documents for Section 8 company registration:

KYC (Know your Client) of director: In this we need Basic information like Name, Photo,
Aadhar card, PAN Card, email id, mobile number.

Company Name Name of the company that needed for name approval.
Normally we suggest two names of the company for name approval.

Office Address:  In this, we need an address where the company
officially established. If office at rented property than rent paper. If the
office address at self-owned then property paper needed.  And also needed
the electricity bill for the last two months.

• All documents submitted must be valid.

 

What are the compliances to be complied with after
starting the loan business under the NBFCs?

 

Section 8 Company Shall suits the next
compliances every year:

1. ROC Filings like Annual Returns, Balance Sheets,
Profit and Loss Accounts, etc.;

2. Maintenance of proper accounts;

3. Appointment of Statutory Auditor;

4. tax Returns and GST Returns;

5. Preparation of monetary Statements & get
Audited.

 

 

FAQ:

 

1.   What is the Interest Rate on Loan Amount?

Section 8 Micro Finance is abided by the Reserve
bank of India even it has been exempted from RBI License and hence for the
Interest rate, it has to follow the RBI Guidelines from time to time. Presently
the Interest rate is Maximum 26% P.A on reducing balance method or flat rate as
decided by the mutual agreement.

 

2.    Is Income Tax is levied in Section 8 Microfinance?

Income tax is a tax, which is levied on Income or
profit, the section 8 company is a nonprofit making company and it cannot earn
profits, however we can use the word “Surplus” in lieu of “profit” and the Net
Surplus (after deducting all the expenditures) is Chargeable to tax at the
specified rate of Income Tax but if you have 80G and 12A License, you can get a
benefit of up to 100% deduction of tax.

 

 

3.   Sources of Funds for Section 8 Micro Finance Company
to distribute the loans?

 

section 8 Micro Finance company can raise funds to
distribute the loans or to use for other social activities from the various
sources. Some of them are as follows:

Subscriptions from Members

Donation from Members or outsiders

Lifetime Membership Fee

Tenure-able Membership Fee

FDI (Foreign Direct Investments)

Loan from Banks

Public Deposits

Income from other social activities.

 

4.     Can a Personal Loan be provided by Section 8
Micro-Finance Company?

Yes, as we discussed above, section 8 microfinance
can provide the unsecured loans without collateral and personal loans also come
under the ambit of unsecured loans.

 

5.   Is a section 8 Micro Finance Company eligible to do
Micro Finance business, as it is NGO?

Yes, as we discussed above, section 8 microfinance
company is registered under the Companies Act, 2013 and having a valid license
and certificate and also works under the guidelines of RBI even it is exempted
from license from RBI. The motive to exempt the RBI license to section 8
Companies for helping the poor people through the social

activities.

 

6.   Can we use this NGO for helping people in health
&education or other social activities?

 Yes, but for this, you have to well draft the
Memorandum (Bye-Laws) of the Company. It all is possible. Don’t worry VAKIL
KARO expert will help you surely with all the process.

 

7.   Process to Register Section 8 Micro Finance
company?

Obtaining Digital Signature Certificate (DSC) and
Directors Identification Number (DIN)

Filing of Form INC-1 for Reservation of Name

After the approval of INC-1, File form INC-12 to
registrar for a license under sub section

(1) of section 8. Registrar will issue a license in
Form INC-16 Filing of forms and documents with registrar for incorporation
(This is same as in case of public company limited by shares) Issuance of
certificate of incorporation by registrar To Register the Company estimated
time is 15-30 days.



















































































































































































































 























































































































































































































 

FAQ's About SECTION 8 MICRO FINANCE


YOU ARE AT RIGHT PLACE

We assure you that we treat our clients with the utmost courtesy and respect.

We are specialize in registering a wide range of business entities like Limited Liability Partnership, Private Limited Company, One Person Company, Limited Company, Trust, Society and Section 8 Company.

Solvintax is India’s online business services platform dedicated to helping people easily start and grow their business, at an affordable cost. Our aim is to help the entrepreneur on the legal and regulatory requirements, and be a partner throughout the business lifecycle, offering support at every stage to ensure the business remains compliant and continually growing.

Solvintax is the market leader in company registration services in India, offering a variety of company registration like private limited company registration, one person company registration and Producer Company Registration.

Because, we are dedicated to serve our clients in a qualitative manner for a long years, our client’s believes is the good example of our sincerity.

We have one of the largest platform to serve our clients from across India. – solvintax

We are in heart of our clients since 1989 and dedicated to serve in perpetual manner.

Money back guarantee is the supreme facility for our clients to avail instant liquidity policy.

We have skilled, professional, experienced and dedicating team for our clients to give best & accurate guidance.

Special business development officer is allotted to each customer to save time and boost up efficiency in work.

We have awarded from many corporate entities in corporate excellence and for good services.

Our Team

Our professionals are the people who care about your case.

Testimonials

“VakilKaro gave me step by step guidance on how to grow my business. Now Further Compliances for are very easy to manage my business.”

- Ajay Yadav

“Worked fast on my project, Communicated clearly and efficiently. I highly recommend VakilKaro.”

- Vikas Jangra

“My Biggest win from VakilKaro was understanding how to create a business that is custom tailored for me and that allows me to work in my genius zone and Reach the people who need my help the most.”

- Vijay Shrama

“I have worked with VakilKaro over the past several years. They are always prompt to make changes when asked and does quality work. I would highly recommend them to anyone that needs corporate services or related work.”

- Amit Chauhan

Download The App Now

Welcome To Vakilkaro.co.in

Request a Free Consultation

We will make sure to get back to you as soon as possible within 48hrs.