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Different ways of Setting up Microfinance Business In India

Below is the summary of the MFIs based on four parameters

ParameterNBFC-MFISection 8 CompaniesCooperatives and Mutually aided cooperative societiesSocieties and TrustsNidhi Company
Registration UnderRegistered under Companies act 2013 and with Reserve Bank of IndiaRegistered under Companies act 2013Multi-State Cooperative Societies Act, 2002Societies Registration Act, 1860 and / or Indian Trust Act 1882Registered under Companies act 2013
Net WorthMinimum net owned funds of 5 crore. Fo North Eastern requirement is ` 2 croreNo minimum requirementNo minimum requirementNo minimum requirementNo Minimum Capital Requirement
Recommended ForPoor and lower income groupNon-Commercial Banking and NPONon-Commercial Banking and NPOwhere members have a common interestPoor and lower income group
Rate of interest1) The average base rate of five largest commercial banks multiplied by 2.75 per annum
2) cost of funds plus margin cap of 10% for MFIs having loan portfolio above ` 100 crore and 12% for those with loan portfolio less than ` 100 crore
The lower of (1) and (2)
Same as NBFC-MFIDecided and Approved by the Board of DirectorsDecide and approved by members at general meetings and by the committeeMaximum Rate of Interest on Loan = 7.5% + Maximum rate offered on deposits.

Nidhi Company

nidhi company is a type of company in the Indian non-banking finance sector, recognized under section 406 of the Companies Act, 2013.[1] Their core business is borrowing and lending money between their members.

Governing Law


Nidhi companies are governed by Nidhi Rules, 2014. They are incorporated in the nature of Public Limited company and hence, they have to comply with two set of norms, one of Public limited company as per Companies Act, 2013 and another is for Nidhi rules, 2014. No RBI approval is necessary to register the company, as RBI has specifically exempted this category of NBFC in India to comply its core provisions such as registration with RBI etc. Every nidhi company must ensure within a period of one year from the commencement that it has not less than 200 members.

References:

1https://muds.co.in/micro-financing-and-nbfcs/setting-up-of-micro-finance-business/
2https://en.wikipedia.org/wiki/Nidhi_company

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