Nidhi Company- Meaning, Key Features, advantages & Registration

  • August 1, 2019
  • CA Chandan Agarwal's Office
Chandan Agarwal - Nidhi

Chandan Agarwal – NidhiChandan Agarwal – Nidhi

What is Nidhi Company ?

Nidhi Company is basically a finance company which can accept deposit from members and lend the same money to its members. Nidhi Company mainly earns through interest on loans and its main expenditure is to pay interest on deposits (FD, RD and savings).  Nidhi companies are governed by Nidhi Rules, 2014. They are incorporated in the nature of Public Limited Company and hence, they have to comply with two set of norms, one of Public limited company as per Companies Act, 2013 and another is for Nidhi rules, 2014. No RBI approval is necessary to register the company, as RBI has specifically exempted this category of NBFC in India to comply its core provisions such as registration with RBI.

Key Features of Nidhi Company

  • No RBI Requirements
  • Interest on Loan
  • Interest on Deposits
  • Can Operate Branches for Nidhi
  • Loan against Security i.e. gold, property, FD, Govt securities
  • Accept Deposits i.e. FD, RD and Saving Accounts ( Upto 20 Times of Fund Invested)

Some important advantages of a Nidhi company

  • These exceptionally restricted single office foundations having no outside inclusion, offer advances to and acknowledge deposits from members at charming rates, and with least documentation and conventions.
  • These mutual advantage societies look to construct a propensity for making savings and thriftiness among their particular members and work for offering advantages to both the investors and borrowers. Individuals under the lower to middle classes are profiting astoundingly through the exercise/administration of these Nidhi companies. This one is amongst most important advantages of a Nidhi company.
  • The assets of a Nidhi company are essentially added to by its members. What’s more, subsequently, the deposits activated by the Nidhi companies are much lesser than those dealt with by the foundations of the composed saving money/budgetary divisions.
  • The Nidhi companies are not qualified for direct exercises/organizations related to Chit, Reserves, protection, procure buy financing, renting fund, or obtaining of securities offered by corporate bodies. These Nidhis are additionally prohibited by the law to issue inclination shares, debentures, or whatever other obligation instruments in any structures.
  • A Nidhi company is not qualified by the law for acknowledging deposits from or offer credits to some other individual or corporate body, other than its members/shareholders. Once more, the Nidhi companies are not lawfully approved to take any course of action related to loaning or borrowing. Giving any promoting or impetuses to requesting deposits or for encouraging advances, are likewise not permitted by the law.
  • These acknowledge term deposits from members for opportune and secured returns.
  • These cultivate secured and lucrative investments, inferable from inflexible and comfortable membership structure.
  • They borrow money and lend money to their members. They give Fund Benefits and Mutual Fund Benefits.

Nidhi Company Registration

Nidhi Company registration is simple and less complex as compared to other types of finance companies like NBFC which require RBI license to start. A Nidhi Company can be started with an initial capital of Rs.5 lakh and require at least seven people to start with (minimum 7 members). Nidhi Company registration also require three directors initially. Every promoter or director shall need a copy of PAN card, ID proof and address proof to apply for Nidhi Company in India. It takes around 15 to 20 days to get Nidhi Company registered.

Source: https://taxguru.in/chartered-accountant/nidhi-company-meaning-key-features-advantages-registration.html

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