Nidhi Company

Nidhi” means a company which has been incorporated as a Nidhi with the OBJECT of Cultivating the habit of thrift and Savings amongst its members, Receiving deposits from, and Lending to, its members only, for their mutual benefit, and Which complies with rules of Chapter XXVI of Companies Rules, 2014. Nidhi in the Indian context / language means “TREASURE”. However, in the Indian financial sector it refers to any mutual benefit society notified by the Central / Union Government as a Nidhi Company. They are created mainly for cultivating the habit of thrift and savings amongst its members.

The companies doing Nidhi business, viz. borrowing from members and lending to members only, are known under different names such as Nidhi, Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company.

Nidhi’s are more popular in South India and are highly localized single office institutions. They are mutual benefit societies, because their dealings are restricted only to the members; and membership is limited to individuals. The principal source of funds is the contribution from the members. The loans are given to the members at relatively reasonable rates for purposes such as house construction or repairs and are generally secured. The deposits mobilized by Nidhi’s are not much when compared to the organized banking sector.

Our Company Registration package includes the following:

  • DSC for one director and DIN for up to three directors
  • Drafting of MoA & AoA
  • Registration fees and stamp duty
  • Company Incorporation Certificate

Since Nidhi’s come under one class of NBFCs, RBI is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these Nidhi’s deal with their shareholder-members only, RBI has exempted the notified Nidhi’s from the core provisions of the RBI Act and other directions applicable to NBFCs. As on date (February 2013) RBI does not have any specified regulatory framework for Nidhi’s.

What is Nidhi Company?

Nidhi Company is a company registered under Companies Act and notified as a Nidhi company by Central Government under Section 620A of Companies Act, 1956. It is a non-banking finance company doing the business of lending and borrowing with its members or shareholders.

Applicability

The Central Government made ‘Nidhi Rules, 2014’ for the purpose of carrying out the objectives of ‘Nidhi’ companies. These rules shall be applicable to-

  • Every company which had been declared as a Nidhi or Mutual Benefits under Section 620A(1)of Companies Act, 1956;
  • Every company functioning on the lines of a Nidhi company or Mutual benefit society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under Section 620A(1)of Companies Act, 1956
  • Every company incorporated as a Nidhi pursuant to the provisions of Section 406 of the Companies Act, 2013

Requirements for Nidhi Company

  • A Nidhi company to be incorporated under this Act shall be a Public Company;
  • It shall have a minimum paid up equity share capital of 5,00,000/-;
  • No preference shares shall be issued.
  • If preference shares had already been issued by a Nidhi Company before commencement of this Act, such preference shares are to be redeemed in accordance with the terms of issue of such shares
  • The object of the company shall be cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending to its members only for their mutual benefits
  • It shall have the words ‘Nidhi Limited’ as part of its name;

Requirement after Incorporation:

  • Minimum number of members should be 200;
  • Net owned funds shall be Rs.10,00,000/- or more
  • Ratio of net owned funds to deposit shall be not more than 1:20
  • Unencumbered term deposits of not less than 10% of the outstanding deposits as specified in Rule 14

Rule 6 provides general restrictions. According to this Rule no Nidhi shall-

  • Carry on the business of

    • Chit Fund,
    • Hire Purchase Finance,
    • Leasing Finance
    • Insurance or Acquisition of Securities issued by anybody corporate

  • Issue

    • Preference Shares,
    • Debentures or
    • Any Other Debt Instrument by any name or in any form whatsoever;
    • Open any Current Account with its members;

  • Acquire another company by

    • Purchase of securities or
    • Control the composition of the Board of Directors of any other company in any manner whatsoever or
    • Accept Deposits from or lend to any person, other than its members;
    • Pledge any of the assets lodged by its members as security
    • Take Deposits from or lend money to anybody corporate
    • Enter into any Partnership Arrangement in its borrowing or lending activities
    • Issue or cause to be issued any advertisement in any form for soliciting deposit

  • Membership

    • A Nidhi shall not submit a body corporate or trust as a member.
    • Except as otherwise permitted under these rules, every Nidhi shall ensure that its membership is not reduced to less than 200 members at any time.
    • But deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.

  • Share capital and allotment

    • Every company which had been declared as a Nidhi or Mutual Benefits under Section 620A(1)of Companies Act, 1956;
    • Every company functioning on the lines of a Nidhi company or Mutual benefit society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under Section 620A(1)of Companies Act, 1956;
    • No service charge shall be levied for issue of shares.
    • A savings account holder and a recurring deposit account holder shall at least 10 equity shares of Rs.10/-.

  • Acceptance of deposits

    • A Nidhi shall not accept deposits exceeding 20 times of its Net Owned Assets as per last audited financial statements.
    • The fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of 60 months.
    • Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period of 60 months.
    • In case of recurring deposits relating to mortgage loans, the maximum period of recurring deposits shall correspond to the repayment period of such loans granted by Nidhi.
    • The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed Rs.1,00,000/- and the interest shall not exceed 2% above the rate of interest payable to savings bank account by nationalized banks.
    • Interest for fixed and recurring deposits shall be at a rate not exceeding the maximum rate of interest prescribed by RBI which the NBFC can pay on their public deposits.

  • Loan

    • 2,00,000/- where the total amount of deposits from members is less than Rs.2 crores.
    • 7,50,000/- where the total amount of deposits from its members more than Rs.2 crores but less than Rs.20 crores
    • 12,00,000/- where the total amount of deposits from its members is more than Rs.25 crores but less than Rs.50 crores
    • 15,00,000/- where the total amount of deposits from its members is more than Rs.50 crores

  • Documents To Be Submitted

    • Step 1: PAN Card/ ID Proof of the Partners.
    • Step 2: Address Proof of the partners.
    • Step 3: Residence Proof of Partners.
    • Step 4: Photograph
    • Step 5: Passport (in case of Foreign Nationals/ NRIs)

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