Section 8 microfinance company at a glance
- Legal form
- Section 8 company, Companies Act 2013
- Registered with
- Registrar of Companies (MCA)
- RBI registration
- Not needed if exemption conditions are met
- Loan limits
- Up to ₹50,000 (business) / ₹1,25,000 (dwelling unit)
- Deposits
- Cannot accept public deposits
- Minimum people
- 2 directors and 2 members
- Minimum capital
- No legal minimum
- Profits
- Cannot be distributed to members
- Government fee
- Depends on state stamp duty and capital
- Professional fee
- Get a Quote
- Timeline
- Depends on name approval and ROC processing
- Yearly compliance
- Audit, ROC filings, income tax return
What is a Section 8 microfinance company?
It is a non-profit company registered under Section 8 of the Companies Act, 2013, whose main activity is giving small loans to poor and low-income people so they can start or grow a small business, or build a home.
Microfinance means small, usually collateral-free loans for people who can't easily borrow from banks — a vegetable seller who needs ₹20,000 for stock, a tailor buying a second sewing machine, or a self-help group member starting a small dairy unit.
Normally, a company whose main business is lending must register with the Reserve Bank of India as a Non-Banking Financial Company (NBFC). However, RBI exempts non-profit companies that do microfinance within certain limits. That's why many NGOs and social entrepreneurs choose this route — it allows lending on a small scale without NBFC registration.
Because it is a Section 8 company, the organisation cannot be run for profit. Any surplus from interest must be used for its objects — for example, lending to more people — and cannot be paid out as dividends.
Does a Section 8 microfinance company need RBI registration?
No — as long as it meets all three of RBI's conditions: it gives micro loans only within the prescribed limits to poor persons, it is licensed as a Section 8 company, and it does not accept public deposits.
| Condition | What it means in practice |
|---|---|
| Micro financing within limits | Credit of up to ₹50,000 for a business enterprise, and up to ₹1,25,000 for meeting the cost of a dwelling unit, given to a poor person to raise their income and standard of living |
| Licensed non-profit company | Licensed under Section 25 of the Companies Act, 1956 — the equivalent today is Section 8 of the Companies Act, 2013 |
| No public deposits | The company must not accept public deposits as defined by RBI |
A company meeting these conditions is exempt from key NBFC provisions of the RBI Act, 1934, including the requirement to obtain a certificate of registration under Section 45-IA.
The exemption is conditional. If the company gives larger loans, lends outside its objects or accepts deposits, it may be treated as carrying on NBFC business without registration, which is an offence under the RBI Act. Keep records that show every loan stays within the conditions.
Source: RBI — Exemptions from the provisions of RBI Act, 1934. Always check the latest RBI directions before you start lending.
Who should start a Section 8 microfinance company?
This structure suits organisations whose main aim is social impact, not profit. Some typical situations:
NGOs working with self-help groups
An NGO training women's groups in Rajasthan wants to give small working-capital loans. A separate Section 8 company keeps lending apart from grant-funded programmes.
Social entrepreneurs
Someone building a not-for-profit lending model for street vendors or artisans, funded by grants, donations and borrowings.
Rural livelihood projects
Groups supporting small producers with loans for livestock, tools or raw material for a small business.
Groups formalising informal lending
A community group already lending informally that wants a legal structure, audited accounts and accountability.
It is not the right structure if you want a profit-making lending business, larger loans or to raise deposits — that needs NBFC registration with RBI. See the comparison below.
Benefits of the Section 8 route for microfinance
- No NBFC registration with RBI while you stay within the exemption conditions — avoiding the large net owned fund an NBFC needs.
- No minimum capital under the Companies Act.
- Limited liability for members.
- Separate legal identity — the company can open bank accounts, borrow and sign agreements in its own name.
- Transparency for funders — audited accounts and MCA filings make it easier for donors and lenders to check your work.
- Possible tax benefits — it may apply for registration as a non-profit under the Income-tax Act, 2025, subject to conditions (see FAQs).
- Continuity — the company continues even if directors or members change.
What can't a Section 8 microfinance company do?
- Accept public deposits, including savings or fixed deposits from the public.
- Give loans above ₹50,000 (business) or ₹1,25,000 (dwelling unit) per borrower under the exemption.
- Distribute profits or dividends to its members.
- Use the word "Bank" in its name or present itself as a bank.
- Lend for purposes outside its charitable objects.
- Use coercive recovery methods. State laws on money lending or microfinance recovery may also apply.
Some states have their own laws on money lending or microfinance. Before you start lending, check the rules of each state where you will operate — we can help you with this.
Eligibility to register a Section 8 microfinance company
- At least 2 directors (for a private Section 8 company), with at least one director resident in India.
- At least 2 members — directors can also be members.
- Objects focused on charitable purposes such as poverty alleviation and livelihood support, with microfinance clearly included.
- A clause in the MOA that prohibits distributing profits to members.
- A registered office address in India.
- Directors who are not disqualified under the Companies Act, with a DSC and DIN.
Documents required for Section 8 microfinance company registration
| Document | Details |
|---|---|
| PAN card | All directors and members (Indian nationals) |
| Identity & address proof | Aadhaar, passport, voter ID or driving licence |
| Recent address proof | Bank statement or utility bill, usually not older than two months |
| Photographs | Passport-size photo of each director and member |
| Registered office proof | Recent electricity, water or gas bill; rent agreement and NOC from the owner if rented |
| Digital Signature (DSC) | For proposed directors — see DSC service |
| MOA (Form INC-13) & AOA | With microfinance and poverty-alleviation objects and a no-profit-distribution clause |
| Projected income & expenditure | Estimate for the next three years |
| Declarations (INC-14, INC-15) | By a practising professional and by each applicant |
| Lending policy (recommended) | Loan sizes, borrower eligibility, interest, KYC and recovery — not filed with MCA, but funders usually ask for it |
How to register a Section 8 microfinance company: step by step
Plan a lending model within RBI's limits, get DSCs, reserve the name, draft the MOA and AOA, file the SPICe+ incorporation form with the Section 8 licence application, and receive the certificate of incorporation.
Plan the lending model
Confirm who you will lend to, loan sizes, interest and funding sources — and check that everything fits RBI's exemption.
Get Digital Signature Certificates
DSCs are needed for the directors to sign the incorporation forms.
Check and reserve the name
Apply through SPICe+ Part A. Section 8 names usually include words like Foundation, Association or Council. Names with "Microfinance" or "Finance" may get extra scrutiny, so we check them before filing.
Draft MOA, AOA and projections
Objects must clearly cover microfinance for poverty alleviation and prohibit profit distribution. We also prepare the three-year income and expenditure estimate.
File incorporation and licence application
File the SPICe+ form along with the Section 8 licence application and declarations. Directors get their DIN through this process.
Certificate of incorporation
Once approved, the Registrar issues the certificate of incorporation with the licence, and PAN and TAN are allotted.
Set up before you lend
Open a bank account and put in place a lending policy, borrower KYC, loan documents and an accounting system. Tax registration can be applied for separately.
How much does it cost to register a Section 8 microfinance company?
The total cost is the government fees (MCA filing fees and state stamp duty), the DSC cost, and our professional fee. Stamp duty depends on the state and the authorised capital, so there is no single fixed figure.
| Cost head | Paid to | Amount |
|---|---|---|
| MCA filing fees | Ministry of Corporate Affairs | As per the MCA fee schedule — depends on capital |
| Stamp duty | State government | Varies by state |
| DSC | Certifying authority | Depends on provider and validity |
| Professional fee | The Legal India | Get a Quote |
We share government and professional fees separately, in writing, before you proceed.
How long does registration take?
There is no fixed timeline. It depends on name approval, how complete and accurate the documents are, and processing time at the Registrar. If the Registrar asks for changes, resubmission adds time. Once your documents are ready, we file promptly and keep you updated at each stage.
Compliance after registration
- Statutory audit of accounts every year.
- Annual filings with MCA — financial statements (AOC-4) and annual return (MGT-7 / MGT-7A).
- Income tax return every year.
- Board meetings — Section 8 companies have some relaxations, but meetings must still be held and minuted.
- Director KYC (DIR-3 KYC) and statutory registers.
- Loan records and borrower KYC showing that every loan stays within RBI's exemption limits.
- Additional reports if the company is registered as a non-profit under the Income-tax Act.
We can handle these through our Section 8 compliance service.
Section 8 microfinance company vs NBFC-MFI vs Nidhi company
| Feature | Section 8 microfinance | NBFC-MFI | Nidhi company |
|---|---|---|---|
| Purpose | Non-profit lending to poor persons | For-profit microfinance | Lending and deposits among members |
| RBI registration | Not needed within exemption | Mandatory | Governed mainly by the Nidhi Rules, 2014 |
| Loan size | Up to ₹50,000 / ₹1,25,000 | As per RBI's microfinance rules | To members only, as per Nidhi Rules |
| Deposits | No public deposits | Generally not deposit-taking | From members only |
| Capital | No legal minimum | RBI-prescribed net owned fund (substantial) | As prescribed under Nidhi Rules |
| Profit distribution | Not allowed | Allowed | Allowed, subject to the rules |
| Best for | NGOs and social enterprises | Commercial microfinance businesses | Community savings-and-credit groups |
If a Nidhi structure fits better, see Nidhi company registration. Rules change from time to time; we confirm current requirements before filing.
Common mistakes to avoid
- Choosing Section 8 when you actually want a profit-making lending business.
- Writing vague MOA objects that don't clearly cover microfinance, which leads to queries from the Registrar.
- Collecting "savings" or deposits from borrowers or the public.
- Not keeping records that prove loans stay within limits and go to the intended borrowers.
- Assuming tax exemption is automatic — it needs a separate application.
- Ignoring state laws on money lending or microfinance.
- Not planning funding — a Section 8 company can't raise profit-seeking equity; funds come from members, grants, donations and borrowings.