Enquiry form
Nidhi Company is a type of Non-Banking Financial Company (NBFC). It was created with the purpose of borrowing and lending money to its members. It exhibits the habit of saving in its members and operates on the mutual benefit premise. Nidhi Company does not require a license from the Reserve Bank of India (RBI), making it simple to establish. It is a public company that should have “Nidhi Limited” as the last words in its name.
• It cannot carry any of the following kinds of transactions.
– leasing finance,
– hire purchase finance,
– chit fund,
– insurance, and
– acquisition of securities issued by any corporation.
• It cannot accept deposits from or give loans to some external individual or corporation.
• A Nidhi Company is not empowered to issue preference shares, debentures, or some other debt instruments in any form.
• It does not need any license from RBI to operate a loan business.
• It is not entitled to perform either a “vehicle finance business or microfinance business” in India.
• Within 12 months of registration, the number of members must be at least 200.
• A maximum interest rate of 20% p.a. (calculated by the reducing balance method) can be charged.
• The maximum rate of interest that can be offered on savings deposit account shall not exceed 2% above the rate offered by Nationalised Banks.
• Nidhi Company can accept FD, RD & savings and can earn an interest of 12.5% currently.
• The rate of interest that can be offered on Fixed and Recurring Deposits shall not exceed the maximum rate of interest prescribed by RBI for the NBFCs to be offered on deposits. The maximum limit for the rate of interest for NBFCs is also applicable to the Nidhi companies.
• It’s operations must be limited to the district level for the first 3 Years. After completion of 3 years, 3 offices can be set up within the same district. For expansion out of the district, prior approval from the “Regulator Director” is required.
• It can only give loans against security. These securities may be Gold, Property, Fixed Deposits, Government Securities, or Life Insurance Certificates.
• Unencumbered deposits (Deposits which aren’t offered as securities for any purpose) should not be less than 10 % of outstanding deposits.
• Filing of Annual Accounts, Audit, and Tax Returns, in the proper format, is compulsory.
The Nidhi Company's directors and shareholders have limited liability. The personal assets of any of the Directors or members are not at risk of being taken by banks, creditors, or the government if the company experiences a loss or faces financial difficulties as a result of its commercial activities.
The primary goal of forming a Nidhi Company is to encourage its members to save money. This is how it accomplishes the other aim of its registration: mutual benefit. The Nidhi Companies are only allowed to "lend and borrow money" from their shareholders/members.
The loans from the Nidhi Company come at a cheaper rate than loans from banks and other NBFCs, for it’s shareholders. And the process of obtaining the loan and customized services are much more convenient and quicker.
Nidhi Company is the safest and the cheapest way of inviting deposits from the general public. You just need to take them as registered members.
Nidhi Company is a close substitute for credit co-operative society. And, therefore, more preferred by the small financer. Once a Nidhi company has been registered, the members can avail of all the benefit’s of a credit co-operative society.
Borrowing and lending to known persons, belonging to the same group, is much less complicated than dealing with banks, where the procedure is impersonal and fixed.
Ministry of Corporate Affairs (MCA) commands the minimum capital requirement of Rs.5 lakhs for the incorporation of a “Nidhi”. And, within 1-year, the capital has to be raised to at least Rs.10 lakhs.
Nidhi Companies play an important role in meeting the needs of lower and middle-income groups by providing them financial help without complex formalities and documentation.
Nidhi Companies take funds from their members and further provides loans to their members only. All transactions are done within this group only. So, no external factors are affecting the working of these companies. The investors/members themselves oversee the operations of the company.
Nidhi Company is a separate legal entity that can acquire assets and incur debts in it’s own name.
Given below are the essential conditions that must be met with for registering or operating a Nidhi Company.
A Nidhi Company has to submit the list of members within 90 days at the end of every financial year, in this Form.
It can request MCA for an extension in this Form, in case it has not been able to add 200 members in it’s first financial year.
Other than the above NDH-1 Form, a half-yearly return is also required to be filed in NDH-3 Form.
The Nidhi Company has to file it’s Annual Returns with MCA through Form MGT-7.
The financial statements and other related documents are to be submitted, annually, in Form AOC-4.
Nidhi Company, like all other businesses, must file it’s Annual Income Tax Returns by 30th September of the following financial year.
Though the sole purpose of Nidhi companies is taking up non-banking financial activities, they are prohibited to perform those transactions that may involve external factors, such as:
• Advertise themselves to invite deposits,
• Chit funds,
• Leasing Finance,
• Hire-Purchase finances,
• Lotteries,
• Insurance,
• Sell, pledge or mortgage the assets kept with it as security for a loan,
• Getting into a partnership for carrying out lending and borrowing activities,
• Taking deposits or lending funds to someone other than its shareholders,
• Issue preference shares, debentures or any other debt instruments,
• Issue equity shares of the nominal value of over Rs. 10/- each,
• Provide it’s deposit holders equity shares which are more than 10 in number and the value of the shares must be more than Rs.100/-,
• Open a current account with it’s members (though it is allowed to open a Savings Account),
• Lend to or take a deposit from a corporate,
• Pay commission, fee or incentive for mobilizing deposits,
• Carry on any other business than borrowing and lending to its members,
• Hire a Purchase Financer,
• Pay any brokerage for granting a loan to its members.
A Nidhi company is not to accept deposits of more than 20 times of it’s Net Owned Funds (NOF) as per it’s last audited financial statements.
The maximum balance in a savings account of one member of a Nidhi company should not be more than Rs.1 lakh. The maximum rate of interest that can be paid on any deposits should not be more than 2% above the rate of interest payable by nationalized banks, on such deposits.
A Nidhi can be incorporated with a minimum of 3 directors and a maximum of 15 Directors.
You need to ensure that the name is not similar to any other company which is already registered, whether it is a Private Limited, OPC, LLP or Public limited company. Also, make sure that the name is not a registered trademark taken by someone under the IP Act of India. Also, make sure that the name is not too generic. Otherwise, the ROC may reject it. Moreover, try not to use abbreviations, adjectives. And it should end with Nidhi Limited.
1. An individual person, not a corporate body or trust, can become a member.
2. Is over 18 years of age.
You need to register the company as a limited company under the Companies Act, 2013. It takes approx 30-40 days to register a company.
No rules have been laid down barring a salaried person to become a director of a Nidhi Company. But your employment agreement may mention put some restrictions on you doing so.
No, Nidhi Company can be opened at a residential address or a rented one. You do not need a market place for a registered office address.
You just need:
1. Rent agreement along with the latest rent receipt (if the place is rented).
2. NOC from the Owner.
3. House tax receipts (if the premises are owned)
4. Electricity bill
NOF or Net Owned Fund = Paid up share capital + Free Reserves – Accumulated losses, deferred revenue expenditure, and other intangible assets.
Yes, because Government of India/Ministry of Corporate Affairs/RBI has framed the laws/rules to ensure the security and safety of deposits and Nidhi companies must strictly abide by the rules and regulations framed by the Central Government
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