Page Contents
An NBFC – Microfinance Institution (NBFC-MFI) is a non-deposit taking NBFC (which is not a company licensed under Section 25/8 of the Indian Companies Act, 1956/2013) fulfilling the following conditions: One of the most emerging types of NBFC nowadays is NBFC – Microfinance Institution (NBFC-MFI).
So, any NBFC proposing to carry on the business as NBFC-MFI shall fulfill the above criteria to apply for registration as NBFC-MFI with RBI.
For North Eastern Region, the minimum NOF limit is INR 2 Cr. Any new company proposing to get registered as NBFC – Microfinance Institution (NBFC – MFI) must have a minimum NOF of at least INR 5 Cr.
Every new NBFC – MFI must maintain a Capital adequacy ratio of at least 15% of its aggregate risk-weighted assets, which shall include Tier I and Tier II Capital.
Also, it must ensure that the total of Tier II Capital shall not be more than 100% of Tier I Capital at any time.
Assets Classification Norms for NBFC- Microfinance Institution
Non-performing asset (NPA): Asset shall be classified as NPA if either interest or principal payment becomes overdue for 90 days or more for those assets. Standard Asset: Those Assets are classified as standard assets in whose respect there is no default either in principle or interest payment and which does not disclose any problem and also those do not carry any risk other than risk attached to a business.
NBFC–MFI at any point of time shall maintain an aggregate loan provision of not less than the higher of the following:
The other provisions must be made by the NBFC-MFI as per the relevant Prudential Norm applicable to the company.
MFI Type | Loan Portfolio | Margin Cap |
Large MFI | More than 100 Cr | Not exceeding 10% |
Other MFI | Less than or equal to 100 Cr | Not exceeding 12% |
Margin Cap: The margin cap for NBFC-MFI is as follows
Read More on Know About Overview of oversea investment by NBFC
NBFC-MFIs shall recover only the actual cost of insurance for g life, health, group, or livestock for borrower and spouse.
Administrative charges if any, recovered, shall be as per IRDA guidelines.
Processing fees to be charged by NBFC-MFI
The Processing charges for any loan shall not exceed 1 % of the gross loan amount. Also, Processing charges must not be included in the interest cap or margin cap.
The annual Statutory Auditor certificate as required to be submitted by every NBFC concerning the Company’s position as of March 31 every year, must also be submitted by NBFC-MFI, which shall also specify that the company fulfills all the conditions as prescribed to be classified as NBFC-MFI. Annual Statutory Auditors certificate Submission
Read more on Know why RBI Cancel the 7 NBFC Registration Certificate
MSME Minister Nitin Gadkari has been encouraged to add retail and wholesale commerce to the list of activities eligible for registration as an MSME by FIDC, a national organization for assets and loan financing NBFCs catering to MSMEs. The idea was made as part of a representation to the minister earlier this week to increase credit flow to MSMEs, which was followed by a letter reaffirming requests given to the minister on Saturday. “Traders make up around a third of all MSMEs in the country, and as a result, they are ineligible for liquidity support from the banking system or the extension of much-needed priority sector incentives.
Frequently Ask Question( FAQ) on NBFC
Q 1; What is the minimum NOF Required for NBFC – Microfinance institution?
Ans. The Minimum NOF required for NBFC – Microfinance institution is INR 5 Cr.
Q 2; Is there any relaxation in NOF for NBFC – Microfinance institution proposed to be registered in the North Eastern Region?
Ans. Yes, the NOF required for NBFC – Microfinance institution proposed to be registered in the North Eastern Region is INR 2 Cr.
Q 3; Is there any limit on processing fees to be charged on loans by NBFC-MFI?
Ans. Yes, the maximum processing fees that NBFC-MFI can charge is 1% of the loan amount.
Q 4 Does RBI regulate Microfinance institutions registered under section 25/8 of companies act 1956/2013?
AnsNo, those Microfinance institutions are regulated by ROC only.
CS Akshay Gupta is a diligent and innovative qualified Company Secretary, striving in matters related to Corporate Law. Akshay takes a deep interest in corporate, NBFC and FDI matters and his specialization includes corporate Compliance, FEMA Compliances, and NBFC Registration. As a Company Secretary, Akshay is passionate about matters relating to corporate funding, NBFC, and its compliances.
Don’t Worry! Our experts are here to help you. Get in Touch with our team for easy filing of SMF Form FCGPR.
Write to RAJPUT JAIN & ASSOCIATES or call us on 9555555480
Popular blog:-
All about Financial Forensics & its Applications Financial Forensics and Forensic Audit Techniques Financial forensics and forensic audit techniques are… Read More
Code of Conduct in Forensic Audit: Introduction: A forensic audit is a specialized examination that investigates financial records to uncover… Read More
When is the cancellation revocation applicable? Procedure for Implement Revocation for GST cancellation This applies only if, on its own… Read More
Enhancement Made to the GST Portal - Significant Update Goods and Services Tax Network is pleased to inform that an… Read More
ITC Mismatch GSTR-2B vs GSTR-3B - DRC-01C Intimation under Rule 88D New mechanism to deal with Input Tax Credit mismatches… Read More
Hurdles with Hindu Undivided Family Dissolution: The Hindu Undivided Family (HUF) is a recognized legal entity under the Income-tax Act,… Read More