Microfinance Company (NBFC-MFI) Registration with RBI
A microfinance company is an NBFC registered with the Reserve Bank of India that keeps at least 60% of its total assets in microfinance loans. To register one, you incorporate a company, build net owned funds of ₹10 crore and apply to RBI on the PRAVAAH portal for a certificate of registration. We prepare the company, the application and the Board policies.
What it is
An NBFC-MFI is a non-deposit taking NBFC with at least 60% of its total assets, net of intangible assets, deployed in microfinance loans on an ongoing basis. That is the definition in paragraph 8(3) of the RBI (Non-Banking Financial Companies – Microfinance Institution) Directions, 2025, issued on 28 November 2025. RBI lowered this threshold from 75% to 60% in June 2025.
A microfinance loan is a collateral-free loan to a household with annual income up to ₹3,00,000. A household means one family unit: husband, wife and their unmarried children. In practice, a vegetable seller in Palwal whose family earns ₹2.4 lakh a year qualifies; the same family at ₹3.5 lakh does not. The loan cannot be backed by a lien on the borrower’s deposit account or by hypothecation of any security.
Like every NBFC, a microfinance company needs a certificate of registration (CoR) under Section 45-IA of the RBI Act, 1934 before it starts lending. The application goes through RBI’s PRAVAAH portal.
Who it applies to
Lend to households earning up to ₹3 lakh
Promoters who want most of their book in small, collateral-free loans to households earning up to ₹3 lakh a year, usually through joint liability groups or individual loans.
Grow microfinance past 25% of an NBFC’s book
An NBFC that is not an NBFC-MFI may keep microfinance loans up to 25% of its total assets. Cross that line and you need to qualify as an NBFC-MFI. Think of a Faridabad NBFC that started with two-wheeler loans and now finds self-help group lending growing fastest: at 25% it has to choose.
Outgrow the Section 8 exemption
Not-for-profit companies doing only microfinance are exempt from registration while their assets stay below ₹100 crore. Once they cross it, they must register with RBI.
Why it matters
Lend at scale, lawfully
Section 45-IA bars any company from carrying on non-banking financial business as its principal business without a CoR. Here is the catch: the microfinance exemption in paragraph 51 of the registration Directions covers Section 8 companies only.
Borrow from banks on a registered footing
Banks and other lenders fund registered NBFCs far more readily than unregistered lenders. The CoR is the starting point for those conversations.
Protect borrowers from over-lending
Household repayment obligations are capped at 50% of monthly household income. Your credit policy has to enforce it on every loan.
Which microfinance route fits you
| Route | Entry capital | Microfinance limit | RBI CoR? |
|---|---|---|---|
| NBFC-MFI | ₹10 crore NOF | At least 60% of total assets | Yes |
| Other NBFC (e.g. NBFC-ICC) | ₹10 crore NOF | Up to 25% of total assets | Yes |
| Section 8 microfinance company | No RBI NOF | Only microfinance loans; assets below ₹100 crore | No, while conditions are met |
| Nidhi company | ₹10 lakh paid-up; ₹20 lakh NOF | Members only; not microfinance as such | No (declared by MCA) |
Documents required
Company records
- Certificate of incorporation, MoA and AoA with financing objects
- Board resolution approving the RBI application
- Shareholding pattern and details of group entities
- Bank certificate and auditor’s certificate showing NOF of ₹10 crore
Promoters and directors
- PAN, Aadhaar and address proof
- Fit-and-proper declarations
- Profiles showing finance or lending experience
- Bankers’ or credit reports where asked
Business and policy papers
- Business plan with three-year projections
- Board-approved pricing policy for microfinance loans
- Policy on the 50% household repayment limit
- KYC and fair practices policies
How it works
Test the route against your capital
We confirm that the NBFC-MFI route suits your plan and that ₹10 crore of NOF can be brought in, rather than a Section 8 or Nidhi structure.
Incorporate a lending company
We set up a private limited company through SPICe+ on the MCA V3 portal, with objects that cover lending and microfinance.
Bring in ₹10 crore of NOF
The capital is brought in through share issue and certified by the statutory auditor.
Draft the Board policies
We prepare the pricing policy, the household repayment-limit policy, KYC and fair practices code, and the business plan.
Apply for the CoR on PRAVAAH
The application is filed online on RBI’s PRAVAAH portal with the prescribed documents. We answer RBI’s queries until the CoR is issued.
Join an SRO and start lending
After the CoR, join an RBI-recognised SRO for NBFC-MFIs and the credit bureaus, and set up loan management software that tracks household income and repayment limits.
Timelines
RBI decision
The Directions set no fixed processing time. Complete documents are what keep the review moving.
Quarterly and yearly returns
Base Layer NBFCs (assets below ₹1,000 crore) file DNBS02 within 21 days of each quarter. The Statutory Auditor’s Certificate is due by 31 December every year. Our NBFC returns and filings service covers both.
NOF glide path
Existing NBFC-MFIs must reach ₹10 crore NOF by 31 March 2027 (₹7 crore, or ₹5 crore in the North East, by 31 March 2025).
What happens if you lend without registration
Breach of Section 45-IA
Carrying on lending as a principal business without a CoR is barred under Section 45-IA of the RBI Act,. Do not disburse a single loan before the CoR arrives.
Fall below 60% and RBI wants a plan
If microfinance loans stay below 60% of total assets for four consecutive quarters, the NBFC-MFI must approach RBI with a remediation plan.
Miss the NOF and lose eligibility
An NBFC that fails the NOF requirement is not eligible to hold the CoR under the 2025 registration Directions.
Frequently asked questions
What makes an NBFC a microfinance company?
An NBFC becomes an NBFC-MFI when it is non-deposit taking and keeps at least 60% of its total assets, net of intangibles, in microfinance loans on an ongoing basis. This is paragraph 8(3) of RBI’s Microfinance Institution Directions, 2025. Before June 2025 the figure was 75%. The test applies on an ongoing basis, so plan the portfolio mix from the first disbursement.
What counts as a microfinance loan?
A microfinance loan is a collateral-free loan to a household with annual income up to ₹3,00,000. A household is husband, wife and their unmarried children. The loan cannot be tied to a lien on the borrower’s deposit account or backed by hypothecation. Monthly repayment obligations of the household are capped at 50% of monthly household income. We build these checks into your credit process.
How much capital does an NBFC-MFI need?
A new NBFC-MFI needs net owned funds of ₹10 crore, under paragraph 39 of RBI’s 2025 registration Directions. Existing NBFC-MFIs follow a glide path and must reach ₹10 crore by 31 March 2027. If ₹10 crore is not practical, a Section 8 structure may suit you, and we can compare the two.
Can an ordinary NBFC give microfinance loans?
Yes, up to 25% of its total assets. Paragraph 49 of the Microfinance Institution Directions caps microfinance loans for any NBFC that does not qualify as an NBFC-MFI. Those loans must still follow the microfinance rules on household income, collateral and the 50% repayment limit. If you expect to cross 25%, it is cleaner to plan the NBFC-MFI route from the start.
Is there an interest rate cap for microfinance loans?
RBI asks every NBFC to put in place a Board-approved policy on pricing microfinance loans, under paragraph 60 of the Credit Facilities Directions, 2025, rather than setting one fixed rate. Pricing also sits alongside paragraph 55, which caps a household’s total monthly repayments at 50% of its monthly income. We draft a pricing policy that your Board can defend.
What if our microfinance share falls below 60%?
If an NBFC-MFI stays below 60% for four consecutive quarters, it must approach RBI with a remediation plan, under paragraph 12 of the Microfinance Institution Directions. A dip in one quarter does not trigger this. Tracking the ratio monthly lets you correct course early, and our compliance team can watch it for you.
Is SRO membership compulsory?
Yes. An NBFC-MFI must become a member of at least one Self-Regulatory Organisation for NBFC-MFIs recognised by RBI, under paragraph 46 of the Microfinance Institution Directions. Separately, RBI’s Credit Information Reporting Directions, 2025 require every NBFC to be a member of all credit information companies. We schedule both right after the CoR, so you start lending with everything in place.
How long does RBI take to grant the CoR?
The 2025 registration Directions do not fix a time limit for RBI’s decision. In practice the time depends on how complete the application is and how quickly queries are answered. Clean NOF certification and a credible business plan matter most. We file only when the papers are complete, which cuts down the back-and-forth.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Government charges at the incorporation stage include ₹1,000 for name reservation, the SPICe+ fee linked to authorised capital and State stamp duty on the MoA and AoA.
Ready to begin?
Tell us your target borrowers and how much capital is ready, and we will map your route to an NBFC-MFI certificate of registration.