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Nidhi Companies are registered Limited Companies involved in taking deposits and lending to its members. The activities of a Nidhi Company does fall under the purview of Reserve Bank of India, as it is similar to a NBFC. Hence, we can say Nidhi Company is a Non-Banking Financial Company (NBFC) which does not require any license from the RBI. It is ideal for Lending and Borrowing amongst Members. Nidhi Companies cannot deal with anybody other than its members.Companies Act 2013 and Nidhi Rules 2014 are the governing bodies regulating the functions and operations of Nidhi Company in India.
Shareholder enjoys limited liability to the extent of capital invested. In case of any unforeseen liabilities, it would be limited to the company and not impact the shareholders. Shareholder's personal assets protected in the event of the company's insolvency.
A company is a Separate legal entity from its Owners and Management in the eyes of law.It can have a PAN number, bank accounts, licenses, approvals, contracts, assets and liabilities in its unique name.
A Nidhi Company has more credibility as compared to any other Non-profit organization structure like Trust or Society and NGOs.
Company existence will go for ever and its existence will not be effected by the death of shareholders, directors or transfer of shares to others.
Nidhi Company is the safest and the cheapest way of inviting deposits from the general public. Funds can be taken from registered members only.
Obtaining loans, by its member, from Nidhi Company come at a cheaper rate than loans from banks and other NBFCs.
(A) Must have minimum 200 members within 12 months of Incorporation
(B) Net owned fund shall not be less than Rs. 10 Lacs
(C) Net owned funds to deposits ratio should be more than 1:20 at all times.
(D) Unencumbered deposits should not be less than 10 % of outstanding deposits.
(E) It cannot carry business ofleasing finance, hire purchase finance, chit fund, insurance, or acquisition of securities issued by any corporation.
(F) It can only deal with its members and cannot accept deposits from or give loans to some external individual or corporation.
(G) It cannot issue preference shares, debentures, or some other debt instruments in any form.
(H) It cannot perform vehicle finance business or microfinance business in India.
(I) A maximum of 20% p.a. rate of interest can be charged on loans.
(J) The maximum rate of interest that can be offered on saving deposit account shall not exceed 2% above the rate offered by Nationalised Banks.
(K) Rate of Interest that can be offered on Fixed and Recurring Deposit shall not exceed the maximum rate of interest prescribed by RBI for the NBFCs to offer on their deposits. The maximum limit of the rate of interest for NBFCs is also applicable to the Nidhi companies.
(L) Operations limited to 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.
(M) It can only give loans against security. These securities may be Gold, Property, Fixed Deposits, Government Securities or Life Insurance Certificates.
(N) Pay any brokerage or incentive or commission for mobilising deposits from members or for granting loans.
(O) There should be strict adherence to statutory and tax compliances.
~ Conveyance/ Lease deed/ Rent Agreement
~ NOC from Owner
~ Latest Utility Bill of registered Office
~ PAN Card
~ Identity Proof ( Voter’s ID / Passport / Driving License )
~ Address Proof ( Latest Telephone Bill / Electricity Bill/ Bank Account Statement )
~ Photograph
Taxes Applicable
Taxes Applicable