Abstract The purpose of this paper is to examine the role of financial institution and to study the different microfinance models which are empowering rural finance development in India. In this paper an attempt is made to find out how financial institutions are empowering the rural people and study the different microfinance models as well as different clients of the microfinance. India which is the one of the largest microfinance center in the world nowadays. In India more than 25% of its population lives below poverty line. For this poverty alleviation the Govt. of India started various programmes from time and again but failed in achieving this goal. The reasons behind the failure are such as the Govt. of India fail to reach the target population, the loophole in the system, corruption etc. The different countries of the world come with different ideas and schemes and these schemes increased the NPAs .Then the microfinance institution come forward to fulfill these gaps but the outreach is small as compared to the requirement and potential but some progress had been seen in this regard when NABARD and SHGs played an active role in this. After than numbers of different microfinance institution and different NGOs also dived in this business. Govt. must power the microfinance institution for mobilizing savings, with increase demand for the rural finance .How ever keeping in mind the recent experiences, and for the better growth we need to managed these microfinance institution in a better way and provide them adequate finance which full fill the needs of poor and also provide them a social responsibility which is most important for the growth of these microfinance institution and for alleviating poverty from the country. There is no doubt that NGOs played an important role in promoting SHGs so there should be need to start some incentive packages for these NGOs which motivates them to diversify themselves and their business to backward areas also.