Options to Start Finance Business in India without RBI Approval

From a small area in the district to a larger city, the business of finance has been spread widely but illegally. People are doing this business since ages but without following the proper methodologies and legalities which at times, cost them a lot. They cannot sue people for money given and hence bear a great loss. Further, the fear of local police and RBI always keeps daunting in their hearts.

But on the other hand, registering a finance business is a very costly and fulfilling requirement for RBI registration almost feels impossible. But what if we give you a solution to your needs! What if we tell you that we will help you in registering your business legally and that too without the huge RBI registration?

Sounds like we are scamming? No, we are not. We are experts in dealing with finance business and taking care of thousands of similar businesses. Let us understand the simple solutions;

Two types of finance business

To run a finance business without RBI approval, you must learn about the following two types of companies and choose one according to your own needs and requirements;

1. Nidhi Company

2. Microfinance - Under Section 8 Company

Let us each something about each of them;

Nidhi Company

Nidhi Company is a mutual benefit company which can only extend its loans to its members. So, if you want to deal with anyone, you need to him a member by giving some shares (one or ten).

Here are certain pros and cons of Nidhi Company;

Minimum requirements for Nidhi Company

• Seven person
• Minimum 10 lakh capital required
• No RBI approval

Advantage of Nidhi Company registration:

• Does not require RBI approval as Nidhi is exempted from Core Provisions of RBI.
• 100% legal company registered with Nidhi Rules, 2014
• Can accept deposits and extend gold loans and other Secured Loans
• Can run multiple schemes etc.
• Can accept deposit up to 20 times the capital invested

Disadvantages of Nidhi Company Registration:

• Can only give secured loans.
• Can work only in the state where the same is registered.
• Not able to open branches up to 3 years.

Read: Nidhi Company registration in India

Section 8 – Micro Finance Company

This is perhaps one of most beautiful concept for all finance business holders. Section 8 – Microfinance company works completely like a NBFC but it does not need any RBI approval, which is the most important factor. There is no minimum capital requirement for this type of company and most importantly, central government approves this company to work in the area of finance, hence, a 100% legal company.

Here are the following details about microfinance company - Under Section 8 registration;

Requirements for Section 8 microfinance company registration

• Minimum two persons
• No minimum capital but at least one lakh capital recommended

Advantages of section 8 microfinance company registration

• No RBI approval required
• Can work anywhere in India
• 100% legal, can sue people for default.
• Proper guidelines available, so no need to worry about police or RBI.
• RBI has specifically exempted this company to work as per its Master Circular from its core provisions of getting a license from RBI.

Disadvantages of section 8 microfinance company registration

• Owners cannot withdraw funds once invested not even salaries.
• It’s a nonprofit organization and therefore, should work with that motive only.

Read: Microfinance Company registration

What is NBFC?

NBFC (Non-Banking Financial Company) is a full-fledge commercial finance company which is registered with the Reserve Bank of India. For NBFC registration, you will need at least two crore net owned fund (5 crore for Microfinance) to register, which of course a huge requirement to fulfill. Therefore, we advise you to legalize your existing business with small investment before jumping into the ocean of finance.

Read: All About Loan Company NBFC
 

Advice – Which company to register?

Choose the company as per your own needs and requirements, if you want us to tell you, then contact us today for finance company registration.