Section 8 Microfinance Company Registration
A Section 8 microfinance company is a not-for-profit company that gives only microfinance loans. If it takes no public deposits and its assets stay below ₹100 crore, RBI exempts it from NBFC registration, so you need no ₹10 crore of net owned funds to start. We set up the company, its licence and its lending policies.
What it is
A Section 8 company is formed under Section 8 of the Companies Act, 2013 for objects such as social welfare, charity or poverty relief. It must apply its income to those objects and is barred from paying any dividend to members. A Section 8 microfinance company uses this structure to lend small, collateral-free amounts to low-income households.
The RBI side is set out in paragraph 51 of the RBI (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025. It exempts such a company from Sections 45-IA, 45-IB and 45-IC of the RBI Act, 1934 when four conditions are all met.
| Condition | What it means |
|---|---|
| Only microfinance loans | Collateral-free loans to households with annual income up to ₹3,00,000, with monthly repayments capped at 50% of household income |
| Licensed under Section 8 | Or under Section 25 of the Companies Act, 1956 |
| No public deposits | As defined in RBI’s Acceptance of Public Deposits Directions, 2025 |
| Asset size below ₹100 crore | Above it, RBI registration is needed |
Who it applies to
Move an NGO’s loan programme into a company
Trusts and societies already running self-help group or livelihood loans that want a company structure with audited accounts.
Start microfinance without ₹10 crore
Promoters who want to do microfinance but cannot bring in the ₹10 crore of NOF an NBFC-MFI needs. Companies law sets no minimum capital for a Section 8 company.
Lend out grant money under a clear structure
Programmes that lend out donor or grant money as small loans and want the not-for-profit character fixed in law.
Why it matters
Skip RBI registration while you are small
Stay inside the four conditions and you lend without an RBI certificate of registration, and without the NBFC entry capital.
Show donors a structure locked to its objects
The Section 8 licence comes from the Central Government, and any change to the MoA or AoA needs its prior approval under Section 8(4). Donors and partners can see the structure is locked to its objects.
Keep a path open to grow
Once assets cross ₹100 crore, the company registers with RBI. If you expect to grow that large, plan early for an NBFC registration.
Section 8 route vs NBFC-MFI
| Point | Section 8 microfinance company | NBFC-MFI |
|---|---|---|
| RBI certificate of registration | Not needed while all four conditions hold | Required under Section 45-IA |
| Entry capital | No statutory minimum | ₹10 crore NOF |
| Profits | Applied to objects; no dividend | Dividend allowed |
| Size limit | Assets below ₹100 crore | No such limit |
| Loan types | Only microfinance loans | At least 60% of assets in microfinance loans |
Documents required
From each director and subscriber
- PAN and Aadhaar
- Passport-size photograph
- Recent bank statement or utility bill
- Consent to act as director (DIR-2)
- Digital signature certificate
For the registered office
- Utility bill not older than two months
- Notarised rent agreement with rent receipt, or ownership proof
- No-objection letter from the owner
For the Section 8 licence
- Draft objects for microfinance and poverty relief
- Estimate of income and expenditure for the next three years
- Declaration by a professional and by each applicant
- Draft credit policy with the ₹3 lakh income and 50% repayment tests
How it works
Confirm the exemption fits
We check that you will give only microfinance loans, take no public deposits and stay below ₹100 crore of assets.
In practice, this is where most plans need adjusting. A Faridabad trust that also gives small gold-backed loans, for example, must drop them, because a loan with collateral is not a microfinance loan.
Get DSCs and reserve the name
Directors get DSCs and we reserve a name through SPICe+ Part A on the MCA V3 portal.
Draft the objects and projections
The memorandum in Form INC-13 sets out the charitable objects and the bar on dividends. We prepare the three-year income and expenditure estimate the licence rule asks for.
File SPICe+ for licence and incorporation
The application under Rule 19 of the Companies (Incorporation) Rules, 2014 goes with SPICe+ (INC-32), and the licence and incorporation come together. Our Section 8 company registration team handles the ROC side end to end.
Adopt policies before the first loan
Before the first loan, the Board adopts the credit and pricing policies, and household income checks go into your loan management software.
Decide on tax registrations
We advise whether 12A and 80G registration suits your income pattern. The income tax return is due every year either way.
Timelines
Board meetings
First meeting within 30 days of incorporation (Section 173(1)); after that, at least one meeting in every six calendar months for a Section 8 company that is up to date with its ROC filings.
ROC annual filings
AGM by 30 September, AOC-4 within 30 days of it and MGT-7 within 60 days. Section 8 companies file MGT-7, not MGT-7A.
Income tax return
ITR-7 if exemption under section 11 is claimed, otherwise ITR-6. For FY 2025-26, the CBDT has extended the audit-case due date to 21 November 2026.
What happens if the conditions are breached
The RBI exemption falls away
Taking public deposits, giving non-microfinance loans or crossing ₹100 crore of assets takes the company outside paragraph 51, and lending then needs an RBI certificate of registration.
The licence can be revoked
Under Section 8(6), the Central Government may revoke the licence for breach of its conditions, after giving the company a hearing.
Fines run into lakhs
Section 8(11) provides a fine of ₹10 lakh to ₹1 crore on the company and ₹25,000 to ₹25 lakh on each director and officer in default.
Frequently asked questions
Does a Section 8 microfinance company need RBI registration?
No, as long as it meets all four conditions in paragraph 51 of RBI’s 2025 registration Directions. It must give only microfinance loans, hold a Section 8 licence, take no public deposits and keep assets below ₹100 crore. Then it is exempt from Sections 45-IA, 45-IB and 45-IC of the RBI Act. We check these conditions with you at the start, so the structure is right from the first loan.
What happens when assets cross ₹100 crore?
The exemption no longer applies, and the company must register with RBI as an NBFC. RBI’s NBFC FAQs say that not-for-profit microfinance companies with assets of ₹100 crore or more need registration. An NBFC-MFI needs net owned funds of ₹10 crore. Track asset size every quarter so you can plan the move well before you reach it.
Which loans can a Section 8 microfinance company give?
Only microfinance loans. That means collateral-free loans to households with annual income up to ₹3,00,000, where the household’s monthly repayments do not exceed 50% of its monthly income. Here is the catch: a single gold or vehicle loan takes the company outside the exemption. A clear credit policy and simple income checks keep every loan inside the rule.
Can a Section 8 microfinance company accept deposits?
No public deposits. Not accepting public deposits, as defined in RBI’s Acceptance of Public Deposits Directions, 2025, is one of the four conditions for the exemption. Typical sources are members’ capital, grants and donations; any borrowing must be checked against the public-deposit definition. We help you check each funding source before you take it, so the exemption stays safe.
Can the promoters earn a profit?
No dividend can be paid to members. Section 8(1) requires the company to apply its profits and income to promoting its objects and to prohibit any dividend. If your plan depends on returns to investors, an NBFC-MFI is the better fit, and we can compare the two structures for you.
Is there a minimum capital requirement?
The Companies Act sets no minimum paid-up capital for a Section 8 company, and RBI’s ₹10 crore NOF rule does not apply while the exemption holds. You still need money to lend. Think of a Palwal livelihood programme planning loans to 500 women: capital, grants and borrowings must cover that book. The three-year income and expenditure estimate filed with the licence application is where we test those numbers together.
How is the Section 8 licence obtained?
The licence is applied for along with incorporation through SPICe+ (INC-32) on the MCA V3 portal, under Rule 19 of the Companies (Incorporation) Rules, 2014. The memorandum is in Form INC-13, and the filing carries a three-year income and expenditure estimate and declarations by a professional and by each applicant. Well-drafted objects avoid repeated resubmissions.
What if we break the licence conditions?
The Central Government can revoke the licence under Section 8(6), after a hearing. Section 8(11) also provides a fine of ₹10 lakh to ₹1 crore on the company and ₹25,000 to ₹25 lakh on each director and officer in default. Breaking the RBI conditions also ends the registration exemption. A yearly compliance review catches problems long before this stage.
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 include ₹1,000 for name reservation, the SPICe+ fee linked to authorised capital and State stamp duty on the MoA and AoA. DSC costs are separate.
Ready to begin?
Tell us who you plan to lend to and how the money will come in, and we will set up a Section 8 microfinance company that stays inside the RBI exemption.