Section 8 Microfinance Company Registration Process and Fees in India

Section 8 Microfinance Company Registration Process and Fees in India. Starting a microfinance company under Section 8 of the Companies Act, 2013 is an effective way to empower low-income individuals and provide financial support to those who are often left out of the formal banking system. A Section 8 Microfinance Company is formed as a non-profit entity that aims to promote financial inclusion and socio-economic development without prioritizing profit generation. This article explains the entire process of Section 8 Microfinance Company Registration, its features, benefits, documents required, and applicable RBI guidelines in simple and clear language.
What is a Section 8 Microfinance Company?
A Section 8 Microfinance Company is a non-profit organization registered under the Companies Act, 2013. Its primary objective is to provide financial assistance, especially small loans, to low-income individuals and businesses who may not be able to access funds from traditional banks. Unlike NBFCs, which require approval from the Reserve Bank of India (RBI), a Section 8 Microfinance Company can operate without RBI registration if it follows certain conditions.
These companies do not aim to earn profits but instead focus on promoting charitable objectives such as education, healthcare, poverty relief, and economic development. Since they work towards social welfare, they are exempt from many strict RBI regulations applicable to NBFCs.
What is a Microfinance Loan?
A microfinance loan is a small, unsecured loan given to a household with an annual income of up to Rs.3,00,000. The loan is designed to meet personal, professional, or emergency needs without requiring any collateral. A household typically includes a married couple and their unmarried children. The loan can be processed and disbursed physically or digitally, and the lender is not allowed to place a lien on the borrower’s deposit account.
These loans are structured to help small business owners, women entrepreneurs, and low-income families to start or expand their activities. The interest rates and repayment terms are governed by RBI regulations, ensuring that borrowers are not charged unreasonably.
Features of a Section 8 Microfinance Company
A Section 8 Microfinance Company has the following distinct features:

Non-Profit Status: These companies are registered as non-profit organizations with the Registrar of Companies (ROC) under Section 8 of the Companies Act, 2013. Their primary goal is social welfare, not profit-making.

No RBI License Required: As long as these companies operate within specified limits and do not accept public deposits, they are not required to get a license from the RBI.

Flexible Lending: Section 8 Microfinance Companies can lend small unsecured loans of up to Rs.50,000 for business needs and Rs.1.25 lakh for residential requirements.

Interest Rate Cap: These companies can charge up to 26% interest per annum. However, interest rates and charges must be disclosed clearly and should not be excessive.

Legal Rights: Section 8 Microfinance Companies have the legal right to initiate proceedings against defaulters for recovery of loans.

No Capital Requirement: Unlike NBFCs that require a minimum capital of Rs.5 crore, Section 8 Microfinance Companies can be established without any minimum capital threshold.

Additional Activities: They can also engage in other welfare-related services such as education, sanitation, and women empowerment as long as these are aligned with the company’s main objectives.

Documents Required for Section 8 Microfinance Company Registration
To complete the Section 8 Microfinance Company Registration, the following documents are required:

PAN and Aadhaar card of both directors

Recent bank statements of both directors

Address proof such as utility bills or voter ID

Passport size photographs

Email address and contact number

Ownership proof or rental agreement for registered office

No Objection Certificate (NOC) from the property owner

State-mandated stamp duty payment

These documents help establish the identity of the promoters and verify the legal address of the company’s registered office.
Section 8 Microfinance Company Registration Process
Step 1: Obtain DSC and DIN
The first step in the Microfinance Company Registration process is to obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN) for all proposed directors. The DSC is used to digitally sign documents filed with the MCA, while the DIN uniquely identifies each director in the official records.
Step 2: Name Approval
The next step is to apply for name approval through Form INC-1 on the MCA portal. The proposed name should reflect the company’s non-profit status and microfinance activity. Words such as "Foundation", "Sanstha", or "Micro Credit" are often used. The Registrar of Companies checks the name availability and reserves the name for 20 days upon approval.
Step 3: Drafting MOA and AOA
Once the name is approved, the Memorandum of Association (MOA) and Articles of Association (AOA) are drafted. The MOA defines the objectives and scope of the company, while the AOA outlines the rules for internal governance. These documents must align with the charitable and financial goals of the company.
Step 4: Filing Incorporation Forms
After drafting the MOA and AOA, the incorporation forms including SPICe+ Part A and B, Form INC-12 (for license), and other declarations must be filed with the MCA. These forms include information about directors, capital structure, registered office, and objectives of the company.
Step 5: Certificate of Incorporation
Once all forms and documents are verified and approved by the MCA, the Certificate of Incorporation is issued along with a unique Company Identification Number (CIN). The license under Section 8 is also granted, officially allowing the company to start operations.
Section 8 Microfinance Company Registration Fees
The process of registering a Section 8 company in India requires the payment of various government fees, which cover essential components such as the Digital Signature Certificate (DSC), Director Identification Number (DIN), name reservation, and the issuance of the Certificate of Incorporation (COI). These costs can vary significantly, generally ranging from around Rs.5,000 to over Rs.2 lakhs, depending largely on the company's authorized capital, which may begin at Rs.1 lakh and go beyond Rs.1 crore. Apart from these statutory charges, additional expenses are incurred for the professional drafting of key legal documents like the Memorandum of Association (MOA) and Articles of Association (AOA), as well as for applying for the Permanent Account Number (PAN) and Tax Account Number (TAN). These supplementary costs usually start from Rs.5,000 onwards, depending on the service provider engaged for the registration process.
Latest RBI Guidelines for Section 8 Microfinance Company
The Reserve Bank of India has updated several guidelines to regulate the microfinance industry. Key points are:

Repayment Cap: Monthly loan repayments should not exceed 50% of a household’s monthly income. For instance, if a household earns Rs.25,000 per month, they cannot be asked to repay more than Rs.12,500 monthly.

Collateral-Free Loans: All loans provided must be collateral-free and cannot have a lien on the borrower’s deposit account.

Disclosure of Charges: Microfinance institutions must clearly mention interest rates, processing charges, and other fees.

Loan Limit: Section 8 Microfinance Companies can provide loans up to Rs.2,40,000, increasing the limit for borrowers to meet their larger financial needs.

Loan Card: Each borrower must be issued a loan card with complete loan details, repayment schedule, and applicable charges.

Conversion to NBFC-MFI: If a Section 8 Microfinance Company’s assets exceed Rs.100 crore, it must convert into an NBFC-MFI within three months to continue its operations on a larger scale.

RBI Exemptions and Legal Status
As per the Master Circular of RBI dated July 1, 2015, Section 8 Microfinance Companies are exempt from certain provisions of the RBI Act, including Sections 45-IA (registration), 45-IB (maintenance of net owned fund), and 45-IC (creation of reserve fund), provided they do not accept public deposits and their activities are limited to micro-lending.
This regulatory exemption enables Section 8 Microfinance Companies to start operations more easily and with fewer compliance obligations, making it an ideal structure for those who wish to contribute to society through financial inclusion.
Advantages of Section 8 Microfinance Company
Registering a Microfinance Company under Section 8 has multiple advantages:

Easy Setup: No requirement to get RBI’s prior approval or maintain large capital.

Social Impact: These companies contribute to poverty reduction and economic development.

Women Empowerment: Special focus on lending to women helps promote gender equality.

Flexible Operations: They can offer a wide range of financial products suited to the needs of low-income groups.

Good Repayment Culture: The repayment rates in microfinance are often higher due to the community-based lending model.

Support from Government: Both the RBI and Ministry of Corporate Affairs recognize their role in social development and provide regulatory support.

Challenges and Considerations
While Section 8 Microfinance Company Registration offers many benefits, there are certain challenges as well:

These companies have a limited scope for lending due to the restrictions on accepting public deposits.

They cannot raise large capital quickly like NBFCs.

As per the latest circulars by MCA, fresh registrations of Section 8 Companies intending to carry out microfinance activities have been restricted.

Any attempt to amend the object clause of existing Section 8 companies to include microfinance may also be denied by the ROC.

Organizations must carefully review the latest MCA guidelines and consult with professionals before starting the registration process.
Conclusion
Section 8 Microfinance Companies play an important role in India’s financial ecosystem by supporting low-income households, encouraging entrepreneurship, and promoting self-employment. The registration process is relatively simple and cost-effective compared to NBFCs, and the regulatory compliance requirements are less stringent. However, with the evolving guidelines from MCA and RBI, it is important to stay updated with current laws and seek Compliance Calendar’s expert advice during the registration process. With proper planning, documentation, and awareness, establishing a Section 8 Microfinance Company can be a powerful step toward inclusive and sustainable financial development in India.
 You can book a consultation through email info@ccoffice.in or Call/Whatsapp at +91 9988424211.
FAQs
Q1. What is a Section 8 Microfinance Company and how is it different from an NBFC-MFI?
Ans. A Section 8 Microfinance Company is a non-profit organization registered under the Companies Act, 2013, with the primary goal of providing collateral-free loans to underserved and low-income groups. Unlike NBFC-MFIs, these companies do not require RBI approval for registration and operate with fewer regulatory requirements, making them easier to establish. However, they must still comply with RBI's microfinance lending norms.
Q2. Do Section 8 Microfinance Companies need RBI approval to start operations?
Ans. No, RBI approval is not required to start a Section 8 Microfinance Company as long as the company adheres to the conditions laid down under the RBI's exempted category. These include offering only unsecured loans up to a certain limit and not accepting public deposits.
Q3. What is the maximum loan amount a Section 8 Microfinance Company can offer?
Ans. As per the latest RBI guidelines, Section 8 Microfinance Companies can extend loans up to Rs.2,40,000 to eligible households, provided the borrower's annual household income does not exceed Rs.3,00,000. The loans must be collateral-free.
Q4. What is the cost of registering a Section 8 Microfinance Company in India?
Ans. The total registration cost can vary depending on the services availed and the company’s authorized capital. Generally, it ranges from Rs.5,000 for basic setups to Rs.2 lakhs or more for companies with higher capital. This includes government fees for DSC, DIN, name approval, COI, and professional charges for MOA, AOA, PAN, and TAN.
Q5. What documents are required for Section 8 Microfinance Company registration?
Ans. Key documents include PAN and Aadhaar of directors, recent bank statements, address proof, passport-sized photos, registered office proof, and a No Objection Certificate (NOC) from the property owner. These documents are needed to verify identity, address, and business location.
Q6. Can a Section 8 Microfinance Company convert into an NBFC-MFI later?
Ans. Yes, as per RBI's revised guidelines, if the assets of a Section 8 Microfinance Company exceed Rs.100 crore, it must convert into a Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI) within three months to continue operating at scale while remaining non-profit in nature.
Q7. Are there any income eligibility limits for borrowers of microfinance loans?
Ans. Yes, microfinance loans can be provided only to households with an annual income of up to Rs.3,00,000. This income ceiling is applicable uniformly across rural and urban areas and is intended to target low-income families.
Q8. Can Section 8 Microfinance Companies lend loans for purposes other than business?
Ans. Yes, Section 8 Microfinance Companies can offer unsecured loans not just for business but also for essential needs like housing (up to Rs.1.25 lakh), health emergencies, education, and other personal necessities, as long as the lending remains within RBI’s defined limits and conditions.

Starting a microfinance company under Section 8 of the Companies Act, 2013 is an effective way to empower low-income individuals and provide financial support to those who are often left out of the formal banking system. A Section 8 Microfinance Company is formed as a non-profit entity that aims to promote financial inclusion and socio-economic development without prioritizing profit generation. This article explains the entire process of Section 8 Microfinance Company Registration, its features, benefits, documents required, and applicable RBI guidelines in simple and clear language.

What is a Section 8 Microfinance Company?

A Section 8 Microfinance Company is a non-profit organization registered under the Companies Act, 2013. Its primary objective is to provide financial assistance, especially small loans, to low-income individuals and businesses who may not be able to access funds from traditional banks. Unlike NBFCs, which require approval from the Reserve Bank of India (RBI), a Section 8 Microfinance Company can operate without RBI registration if it follows certain conditions.

These companies do not aim to earn profits but instead focus on promoting charitable objectives such as education, healthcare, poverty relief, and economic development. Since they work towards social welfare, they are exempt from many strict RBI regulations applicable to NBFCs.

What is a Microfinance Loan?

A microfinance loan is a small, unsecured loan given to a household with an annual income of up to Rs.3,00,000. The loan is designed to meet personal, professional, or emergency needs without requiring any collateral. A household typically includes a married couple and their unmarried children. The loan can be processed and disbursed physically or digitally, and the lender is not allowed to place a lien on the borrower’s deposit account.

These loans are structured to help small business owners, women entrepreneurs, and low-income families to start or expand their activities. The interest rates and repayment terms are governed by RBI regulations, ensuring that borrowers are not charged unreasonably.

Features of a Section 8 Microfinance Company

A Section 8 Microfinance Company has the following distinct features:

Non-Profit Status: These companies are registered as non-profit organizations with the Registrar of Companies (ROC) under Section 8 of the Companies Act, 2013. Their primary goal is social welfare, not profit-making.
No RBI License Required: As long as these companies operate within specified limits and do not accept public deposits, they are not required to get a license from the RBI.
Flexible Lending: Section 8 Microfinance Companies can lend small unsecured loans of up to Rs.50,000 for business needs and Rs.1.25 lakh for residential requirements.
Interest Rate Cap: These companies can charge up to 26% interest per annum. However, interest rates and charges must be disclosed clearly and should not be excessive.
Legal Rights: Section 8 Microfinance Companies have the legal right to initiate proceedings against defaulters for recovery of loans.
No Capital Requirement: Unlike NBFCs that require a minimum capital of Rs.5 crore, Section 8 Microfinance Companies can be established without any minimum capital threshold.
Additional Activities: They can also engage in other welfare-related services such as education, sanitation, and women empowerment as long as these are aligned with the company’s main objectives.

Documents Required for Section 8 Microfinance Company Registration

To complete the Section 8 Microfinance Company Registration, the following documents are required:

PAN and Aadhaar card of both directors
Recent bank statements of both directors
Address proof such as utility bills or voter ID
Passport size photographs
Email address and contact number
Ownership proof or rental agreement for registered office
No Objection Certificate (NOC) from the property owner
State-mandated stamp duty payment

These documents help establish the identity of the promoters and verify the legal address of the company’s registered office.

Section 8 Microfinance Company Registration Process

Step 1: Obtain DSC and DIN

The first step in the Microfinance Company Registration process is to obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN) for all proposed directors. The DSC is used to digitally sign documents filed with the MCA, while the DIN uniquely identifies each director in the official records.

Step 2: Name Approval

The next step is to apply for name approval through Form INC-1 on the MCA portal. The proposed name should reflect the company’s non-profit status and microfinance activity. Words such as "Foundation", "Sanstha", or "Micro Credit" are often used. The Registrar of Companies checks the name availability and reserves the name for 20 days upon approval.

Step 3: Drafting MOA and AOA

Once the name is approved, the Memorandum of Association (MOA) and Articles of Association (AOA) are drafted. The MOA defines the objectives and scope of the company, while the AOA outlines the rules for internal governance. These documents must align with the charitable and financial goals of the company.

Step 4: Filing Incorporation Forms

After drafting the MOA and AOA, the incorporation forms including SPICe+ Part A and B, Form INC-12 (for license), and other declarations must be filed with the MCA. These forms include information about directors, capital structure, registered office, and objectives of the company.

Step 5: Certificate of Incorporation

Once all forms and documents are verified and approved by the MCA, the Certificate of Incorporation is issued along with a unique Company Identification Number (CIN). The license under Section 8 is also granted, officially allowing the company to start operations.

Section 8 Microfinance Company Registration Fees

The process of registering a Section 8 company in India requires the payment of various government fees, which cover essential components such as the Digital Signature Certificate (DSC), Director Identification Number (DIN), name reservation, and the issuance of the Certificate of Incorporation (COI). These costs can vary significantly, generally ranging from around Rs.5,000 to over Rs.2 lakhs, depending largely on the company's authorized capital, which may begin at Rs.1 lakh and go beyond Rs.1 crore. Apart from these statutory charges, additional expenses are incurred for the professional drafting of key legal documents like the Memorandum of Association (MOA) and Articles of Association (AOA), as well as for applying for the Permanent Account Number (PAN) and Tax Account Number (TAN). These supplementary costs usually start from Rs.5,000 onwards, depending on the service provider engaged for the registration process.

Latest RBI Guidelines for Section 8 Microfinance Company

The Reserve Bank of India has updated several guidelines to regulate the microfinance industry. Key points are:

Repayment Cap: Monthly loan repayments should not exceed 50% of a household’s monthly income. For instance, if a household earns Rs.25,000 per month, they cannot be asked to repay more than Rs.12,500 monthly.
Collateral-Free Loans: All loans provided must be collateral-free and cannot have a lien on the borrower’s deposit account.
Disclosure of Charges: Microfinance institutions must clearly mention interest rates, processing charges, and other fees.
Loan Limit: Section 8 Microfinance Companies can provide loans up to Rs.2,40,000, increasing the limit for borrowers to meet their larger financial needs.
Loan Card: Each borrower must be issued a loan card with complete loan details, repayment schedule, and applicable charges.
Conversion to NBFC-MFI: If a Section 8 Microfinance Company’s assets exceed Rs.100 crore, it must convert into an NBFC-MFI within three months to continue its operations on a larger scale.

RBI Exemptions and Legal Status

As per the Master Circular of RBI dated July 1, 2015, Section 8 Microfinance Companies are exempt from certain provisions of the RBI Act, including Sections 45-IA (registration), 45-IB (maintenance of net owned fund), and 45-IC (creation of reserve fund), provided they do not accept public deposits and their activities are limited to micro-lending.

This regulatory exemption enables Section 8 Microfinance Companies to start operations more easily and with fewer compliance obligations, making it an ideal structure for those who wish to contribute to society through financial inclusion.

Advantages of Section 8 Microfinance Company

Registering a Microfinance Company under Section 8 has multiple advantages:

Easy Setup: No requirement to get RBI’s prior approval or maintain large capital.
Social Impact: These companies contribute to poverty reduction and economic development.
Women Empowerment: Special focus on lending to women helps promote gender equality.
Flexible Operations: They can offer a wide range of financial products suited to the needs of low-income groups.
Good Repayment Culture: The repayment rates in microfinance are often higher due to the community-based lending model.
Support from Government: Both the RBI and Ministry of Corporate Affairs recognize their role in social development and provide regulatory support.

Challenges and Considerations

While Section 8 Microfinance Company Registration offers many benefits, there are certain challenges as well:

These companies have a limited scope for lending due to the restrictions on accepting public deposits.
They cannot raise large capital quickly like NBFCs.
As per the latest circulars by MCA, fresh registrations of Section 8 Companies intending to carry out microfinance activities have been restricted.
Any attempt to amend the object clause of existing Section 8 companies to include microfinance may also be denied by the ROC.

Organizations must carefully review the latest MCA guidelines and consult with professionals before starting the registration process.

Conclusion

Section 8 Microfinance Companies play an important role in India’s financial ecosystem by supporting low-income households, encouraging entrepreneurship, and promoting self-employment. The registration process is relatively simple and cost-effective compared to NBFCs, and the regulatory compliance requirements are less stringent. However, with the evolving guidelines from MCA and RBI, it is important to stay updated with current laws and seek Compliance Calendar’s expert advice during the registration process. With proper planning, documentation, and awareness, establishing a Section 8 Microfinance Company can be a powerful step toward inclusive and sustainable financial development in India.

You can book a consultation through email info@ccoffice.in or Call/Whatsapp at +91 9988424211.

FAQs

Q1. What is a Section 8 Microfinance Company and how is it different from an NBFC-MFI?

Ans. A Section 8 Microfinance Company is a non-profit organization registered under the Companies Act, 2013, with the primary goal of providing collateral-free loans to underserved and low-income groups. Unlike NBFC-MFIs, these companies do not require RBI approval for registration and operate with fewer regulatory requirements, making them easier to establish. However, they must still comply with RBI's microfinance lending norms.

Q2. Do Section 8 Microfinance Companies need RBI approval to start operations?

Ans. No, RBI approval is not required to start a Section 8 Microfinance Company as long as the company adheres to the conditions laid down under the RBI's exempted category. These include offering only unsecured loans up to a certain limit and not accepting public deposits.

Q3. What is the maximum loan amount a Section 8 Microfinance Company can offer?

Ans. As per the latest RBI guidelines, Section 8 Microfinance Companies can extend loans up to Rs.2,40,000 to eligible households, provided the borrower's annual household income does not exceed Rs.3,00,000. The loans must be collateral-free.

Q4. What is the cost of registering a Section 8 Microfinance Company in India?

Ans. The total registration cost can vary depending on the services availed and the company’s authorized capital. Generally, it ranges from Rs.5,000 for basic setups to Rs.2 lakhs or more for companies with higher capital. This includes government fees for DSC, DIN, name approval, COI, and professional charges for MOA, AOA, PAN, and TAN.

Q5. What documents are required for Section 8 Microfinance Company registration?

Ans. Key documents include PAN and Aadhaar of directors, recent bank statements, address proof, passport-sized photos, registered office proof, and a No Objection Certificate (NOC) from the property owner. These documents are needed to verify identity, address, and business location.

Q6. Can a Section 8 Microfinance Company convert into an NBFC-MFI later?

Ans. Yes, as per RBI's revised guidelines, if the assets of a Section 8 Microfinance Company exceed Rs.100 crore, it must convert into a Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI) within three months to continue operating at scale while remaining non-profit in nature.

Q7. Are there any income eligibility limits for borrowers of microfinance loans?

Ans. Yes, microfinance loans can be provided only to households with an annual income of up to Rs.3,00,000. This income ceiling is applicable uniformly across rural and urban areas and is intended to target low-income families.

Q8. Can Section 8 Microfinance Companies lend loans for purposes other than business?

Ans. Yes, Section 8 Microfinance Companies can offer unsecured loans not just for business but also for essential needs like housing (up to Rs.1.25 lakh), health emergencies, education, and other personal necessities, as long as the lending remains within RBI’s defined limits and conditions.