{"id":9350,"date":"2020-11-06T08:34:20","date_gmt":"2020-11-06T03:04:20","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=9350"},"modified":"2022-05-08T00:25:40","modified_gmt":"2022-05-07T18:55:40","slug":"nbfc-microfinance-institution-nbfc-mfi","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/","title":{"rendered":"NBFC \u2013 Microfinance Institution (NBFC-MFI) in India"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69ef104896a90\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69ef104896a90\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/#NBFC_%E2%80%93_Microfinance_Institution_NBFC-MFI_in_India\" title=\"NBFC \u2013 Microfinance Institution (NBFC-MFI) in India\">NBFC \u2013 Microfinance Institution (NBFC-MFI) in India<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/#Entry_Point_for_NBFC-_Microfinance_Institution\" title=\"Entry Point for NBFC- Microfinance Institution\">Entry Point for NBFC- Microfinance Institution<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/#Capital_Adequacy_Ratio_for_NBFC%E2%80%93_Microfinance_Institution\" title=\"Capital Adequacy Ratio for NBFC&#8211; Microfinance Institution\">Capital Adequacy Ratio for NBFC&#8211; Microfinance Institution<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/#Provisioning_Norms_for_NBFC-_Microfinance_Institution\" title=\"Provisioning Norms for NBFC- Microfinance Institution\">Provisioning Norms for NBFC- Microfinance Institution<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/#Pricing_of_credit_by_NBFC-MFI\" title=\"Pricing of credit by NBFC-MFI\">Pricing of credit by NBFC-MFI<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/#_Interest_Rates\" title=\"\u00a0Interest Rates: \">\u00a0Interest Rates: <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/#_Insurance_cost_by_NBFC-MFI\" title=\"\u00a0Insurance cost by NBFC-MFI\">\u00a0Insurance cost by NBFC-MFI<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/#Annual_Statutory_Auditors_Certificate_Submission\" title=\"Annual Statutory Auditors Certificate Submission\">Annual Statutory Auditors Certificate Submission<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/#Nitin_Gadkari_is_being_urged_by_the_NBFC_organization_to_include_traders_in_the_MSME_category_and_to_extend_the_Udyam_registration_date\" title=\"Nitin Gadkari is being urged by the NBFC organization to include traders in the MSME category and to extend the Udyam registration date.\">Nitin Gadkari is being urged by the NBFC organization to include traders in the MSME category and to extend the Udyam registration date.<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/#payment_banks_an_overview\" title=\"payment banks an overview\">payment banks an overview<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/carajput.com\/blog\/nbfc-microfinance-institution-nbfc-mfi\/#Last_date_of_DIN_KYC_Has_been_extended\" title=\"Last date of DIN KYC Has been extended\">Last date of DIN KYC Has been extended<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><a style=\"font-size: 16px;\" href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/11\/download-1.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-9354\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/11\/download-1.jpg\" alt=\"www.carajput.com; NBFC-MFI\" width=\"849\" height=\"471\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/11\/download-1.jpg 301w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/11\/download-1-300x166.jpg 300w\" sizes=\"(max-width: 849px) 100vw, 849px\" \/><\/a><\/h2>\n<h2><span class=\"ez-toc-section\" id=\"NBFC_%E2%80%93_Microfinance_Institution_NBFC-MFI_in_India\"><\/span><strong><span style=\"color: #000080;\">NBFC \u2013 Microfinance Institution (NBFC-MFI) in India<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>An <a href=\"https:\/\/carajput.com\/nbfc-compliances.php\">NBFC<\/a> \u2013 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 \u2013 Microfinance Institution (NBFC-MFI).<\/p>\n<ol>\n<li>Minimum NOF of INR .5 cr. (For NBFC-MFIs registered in the North Eastern Region of the country, the minimum NOF requirement shall stand at INR. 2 cr).<\/li>\n<li>Net assets of not less than 85% of which are in the nature of &#8220;qualifying assets.&#8221;<\/li>\n<\/ol>\n<p>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.<\/p>\n<figure id=\"attachment_9355\" aria-describedby=\"caption-attachment-9355\" style=\"width: 859px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/11\/nbfc.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-9355\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/11\/nbfc.jpg\" alt=\"www.carajput.com; NBFC-MFI\" width=\"859\" height=\"443\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/11\/nbfc.jpg 312w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2020\/11\/nbfc-300x155.jpg 300w\" sizes=\"(max-width: 859px) 100vw, 859px\" \/><\/a><figcaption id=\"caption-attachment-9355\" class=\"wp-caption-text\">www.carajput.com; NBFC-MFI<\/figcaption><\/figure>\n<h3><span class=\"ez-toc-section\" id=\"Entry_Point_for_NBFC-_Microfinance_Institution\"><\/span><span style=\"color: #333399;\"><strong>Entry Point for NBFC- Microfinance Institution<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>For North Eastern Region, the minimum NOF limit is INR 2 Cr. Any new <a href=\"https:\/\/carajput.com\/blog\/tag\/public-limited-company\/\">company<\/a> proposing to get registered as NBFC \u2013 Microfinance Institution (NBFC \u2013 MFI) must have a minimum NOF of at least INR 5 Cr.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Capital_Adequacy_Ratio_for_NBFC%E2%80%93_Microfinance_Institution\"><\/span><strong><span style=\"color: #333399;\"><a href=\"https:\/\/carajput.com\/blog\/tag\/what-is-the-perfect-credit-utilization-ratio\/\">Capital Adequacy Ratio<\/a> for <a href=\"https:\/\/carajput.com\/nbfc-compliances.php\">NBFC<\/a>&#8211; Microfinance Institution<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Every new NBFC \u2013 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.<\/p>\n<p>Also, it must ensure that the total of Tier II Capital shall not be more than 100% of Tier I Capital at any time.<\/p>\n<p><span style=\"color: #333399;\"><strong>\u00a0Assets Classification Norms for NBFC- Microfinance Institution<\/strong><\/span><\/p>\n<p><strong>Non-performing asset (NPA):<\/strong> Asset shall be classified as NPA if either interest or principal payment becomes overdue for 90 days or more for those assets. <strong>Standard Asset<\/strong>: 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.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Provisioning_Norms_for_NBFC-_Microfinance_Institution\"><\/span><strong><span style=\"color: #333399;\">Provisioning Norms for NBFC- Microfinance Institution<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>NBFC\u2013MFI at any point of time shall maintain an <strong>aggregate loan provision<\/strong> of not less than the higher of the following:<\/p>\n<ol>\n<li>1% of the outstanding loan portfolio or<\/li>\n<li>50% of the aggregate loan installments are overdue for more than 90 days and less than 180 days and 100% of the aggregate loan installments are overdue for 180 days or more.<\/li>\n<\/ol>\n<p>The other provisions must be made by the NBFC-MFI as per the relevant Prudential Norm applicable to the company.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Pricing_of_credit_by_NBFC-MFI\"><\/span><span style=\"color: #333399;\"><strong>Pricing of credit by <a href=\"https:\/\/www.caindelhiindia.com\/blog\/what-is-systemically-important-non-deposit-taking-nbfcnbfc-nd-si\/\">NBFC<\/a>-MFI<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table style=\"height: 110px;\" width=\"708\">\n<tbody>\n<tr>\n<td width=\"205\"><strong>MFI Type<\/strong><\/td>\n<td width=\"205\"><strong>Loan Portfolio<\/strong><\/td>\n<td width=\"205\"><strong>Margin Cap<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"205\"><strong>Large MFI<\/strong><\/td>\n<td width=\"205\">More than 100 Cr<\/td>\n<td width=\"205\">Not exceeding 10%<\/td>\n<\/tr>\n<tr>\n<td width=\"205\"><strong>Other MFI<\/strong><\/td>\n<td width=\"205\">Less than or equal to 100 Cr<\/td>\n<td width=\"205\">Not exceeding 12%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Margin Cap: <\/strong>The margin cap for NBFC-MFI is as follows<\/p>\n<h3><span class=\"ez-toc-section\" id=\"_Interest_Rates\"><\/span><span style=\"color: #000080;\"><strong>\u00a0<\/strong><\/span><strong><span style=\"color: #000080;\">Interest Rates:<\/span> <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>NBFC-MFI can charge the interest rates by its borrowers from the lower of the following:<\/li>\n<\/ul>\n<ol>\n<li>The fund&#8217;s cost plus margin rate; or<\/li>\n<li>The average base rate of the largest five commercial banks by assets multiplied by 2.75. The average of the base rates is notified by RBI on the last working day of the previous quarter.<\/li>\n<\/ol>\n<ul>\n<li>Interest rates of loans given by NBFC-MFI must not exceed the average borrowing cost plus margin during that financial year.<\/li>\n<li>The rate of interest on the individual loan may be more than 26%, but the variance in the interest rate for minimum and maximum rate for an individual loan shall not be more than 4%<\/li>\n<li>The average interest charged by the MFI and paid on borrowings are to be calculated on average monthly balances of outstanding borrowings and loan portfolios respectively. The figures for interest rates may be certified annually by Statutory Auditors and also disclosed in the Balance Sheet.<\/li>\n<\/ul>\n<p>Read More on\u00a0<a href=\"https:\/\/carajput.com\/blog\/overview-of-overseas-investment-by-nbfc\/\">Know\u00a0 About Overview of oversea investment by NBFC<\/a><\/p>\n<h3><span class=\"ez-toc-section\" id=\"_Insurance_cost_by_NBFC-MFI\"><\/span><strong>\u00a0<span style=\"color: #333399;\">Insurance cost by NBFC-MFI<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>NBFC-MFIs shall recover only the actual cost of insurance for g life, health, group, or livestock for borrower and spouse.<\/p>\n<p>Administrative charges if any, recovered, shall be as per IRDA guidelines.<\/p>\n<p><span style=\"color: #333399;\"><strong>Processing fees to be charged by NBFC-MFI<\/strong><\/span><\/p>\n<p>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.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Annual_Statutory_Auditors_Certificate_Submission\"><\/span><span style=\"color: #333399;\"><strong>Annual Statutory Auditors Certificate Submission<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The annual Statutory Auditor certificate as required to be submitted by every NBFC concerning the Company\u2019s position as of March 31 every year, must also be submitted by <a href=\"https:\/\/carajput.com\/nbfc-compliances.php\">NBFC<\/a>-MFI, which shall also specify that the company fulfills all the conditions as prescribed to be classified as NBFC-MFI. <strong>Annual Statutory Auditors certificate Submission<\/strong><\/p>\n<p>Read more on\u00a0<a href=\"https:\/\/carajput.com\/learn\/reserve-bank-of-india-cancels-registration-certificate-of-7-nbfcs.html\">Know why RBI Cancel the 7 NBFC Registration Certificate<\/a><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Nitin_Gadkari_is_being_urged_by_the_NBFC_organization_to_include_traders_in_the_MSME_category_and_to_extend_the_Udyam_registration_date\"><\/span><span style=\"color: #000080;\"><strong>Nitin Gadkari is being urged by the NBFC organization to include traders in the MSME category and to extend the Udyam registration date.<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>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. \u201cTraders 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.<\/p>\n<p><span style=\"color: #ff0000;\"><strong>Frequently Ask Question( FAQ) on NBFC\u00a0<\/strong><\/span><\/p>\n<p><span style=\"color: #000080;\"><strong>Q 1; What is the minimum NOF Required for NBFC \u2013 Microfinance institution?<\/strong><\/span><\/p>\n<p><strong>Ans<\/strong>. The Minimum NOF required for NBFC &#8211; Microfinance institution is INR 5 Cr.<\/p>\n<p><span style=\"color: #000080;\"><strong>Q 2; Is there any relaxation in NOF for NBFC \u2013 Microfinance institution proposed to be registered in the North Eastern Region?<\/strong><\/span><\/p>\n<p><strong>Ans. <\/strong>Yes, the NOF required for NBFC \u2013 Microfinance institution proposed to be registered in the North Eastern Region is INR 2 Cr.<\/p>\n<p><span style=\"color: #000080;\"><strong>Q 3; Is there any limit on processing fees to be charged on loans by NBFC-MFI?<\/strong><\/span><\/p>\n<p><strong>Ans. <\/strong>Yes, the maximum processing fees that NBFC-MFI can charge is 1% of the loan amount.<\/p>\n<p><span style=\"color: #000080;\"><strong>Q 4 Does RBI regulate Microfinance institutions registered under section 25\/8 of companies act 1956\/2013?<\/strong><\/span><\/p>\n<p><strong>Ans<\/strong>No, those Microfinance institutions are regulated by ROC only.<\/p>\n<p><strong>CS Akshay Gupta<\/strong> 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.<\/p>\n<p>Don\u2019t Worry! Our experts are here to help you. Get in Touch with our team for easy filing of SMF Form FCGPR.<\/p>\n<p>Write to <strong>RAJPUT JAIN &amp; ASSOCIATES<\/strong>\u00a0 or call us on 9555555480<\/p>\n<p>Popular blog:-<\/p>\n<ul>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"payment_banks_an_overview\"><\/span><a href=\"https:\/\/www.caindelhiindia.com\/blog\/payment-banks-an-overview-2\/\">payment banks an overview<\/a><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Last_date_of_DIN_KYC_Has_been_extended\"><\/span><a href=\"https:\/\/carajput.com\/learn\/last-date-of-din-kyc-update-has-been-extended.html\">Last date of DIN KYC Has been extended<\/a><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<li><a href=\"https:\/\/carajput.com\/press-releases\/checklist-of-statutory-audit-of-nbfc.pdf\">Checklist of Statutory Audit of NBFC<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>NBFC \u2013 Microfinance Institution (NBFC-MFI) in India An NBFC \u2013 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 \u2013 Microfinance Institution (NBFC-MFI). Minimum NOF of &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9812,11],"tags":[9430,9433,9429,9432],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/9350"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=9350"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/9350\/revisions"}],"predecessor-version":[{"id":22282,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/9350\/revisions\/22282"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=9350"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=9350"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=9350"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}