Do You Need RBI Approval for Microfinance?

PRADIP MANDAL

Do You Need RBI Approval for Microfinance? (Complete Guide)

✅ Introduction

Many entrepreneurs in India are confused whether RBI approval is required to start a Microfinance Company.

👉 In this blog, we will explain when you need RBI approval, when you don’t, and how Section 8 Companies can legally operate Microfinance activities.

🔹 When RBI Approval is NOT Required

If your company is registered under Section 8 of the Companies Act, 2013.
If your company’s turnover is less than ₹100 Cr.
If your MOA (Memorandum of Association) clearly mentions Microfinance / Credit activities.
Section 8 Companies are considered “Not for Profit” and hence do not require an NBFC license.

🔹 When RBI Approval is Required

If you want to run Microfinance as an NBFC-MFI (Non-Banking Financial Company – Microfinance Institution).
If your total asset size exceeds ₹100 Cr.
If you plan to accept public deposits (not allowed for Section 8).
For larger scale operations under NBFC norms.

🔹 RBI Guidelines for Section 8 Microfinance Companies

Cannot charge more than 26% interest rate.
Must provide loans for productive purposes (small businesses, livelihood).
Must maintain proper documentation (loan agreements, EMI slips, passbooks).
Must follow fair practices for loan recovery.

🔹 YouTube Video

To understand RBI Rules on Microfinance better, watch our video here:

🔹 Frequently Asked Questions (FAQ)

Q1. Can Section 8 Microfinance Company operate without RBI approval?

👉 Yes, up to ₹100 Cr turnover, Section 8 Microfinance does not need RBI approval.

Q2. What happens if a Section 8 Company crosses ₹100 Cr?

👉 Then it must apply for NBFC-MFI license from RBI.

Q3. Can Section 8 Company collect deposits?

👉 No, deposits are not allowed. Only lending activity is permitted.

Q4. What is the maximum interest rate allowed?

👉 As per RBI, Microfinance Companies cannot charge more than 26% interest.

🔹 Why Choose Guglymart?

Expert Legal Guidance – Clear explanation of RBI & MCA rules.
30+ Professional Team – Legal, Audit, Drafting, ITR, Training.
Proven Expertise – Assisted 150+ Microfinance clients.
End-to-End Support – Registration, Audit, Compliance, Loan Management Software.

🔹 Call to Action

👉 Want to start your own Microfinance Business legally?
👉 Guglymart Private Limited will guide you step by step with complete registration, compliance, and RBI rules.

📞 Call Now: 7557813545 / 7602980506 / 9742656135

✉ Email: [email protected]

🌐 Website: [www.guglymart.com]