Nidhi Company
What is a Nidhi Company?
Nidhi Company Registration in India Nidhi Company is registered under the provisions prescribed in the Companies Act, 2013. The only objective of forming a Nidhi Company is to cultivate the habit of thrift and savings amongst its members. The minimum capital requirement to start a Nidhi Company is Rs.10 lakh (Increased via Nidhi (Amendment) Rules, 2022. Since Nidhi Company is registered as a Public Limited Company and must have “Nidhi Limited” as the last words of its name.
Benefits of a Nidhi Company
- Cheaper To Borrow: As a member, one can borrow money at a minimum rate, relative to the rate at which banks lend money. This can be a major advantage in times of need, as different individuals in the mutual benefit society are likely to need funds at different points in time.
- Encourages Savings: It encourages all its members to save money and encourages a thrifty lifestyle. A Nidhi Company, after all, is a mutual benefit society wherein members can lend or borrow money and accept financial aid amongst them.
- Fewer Complications: Borrowing and lending to known persons, where the procedure is fixed, is much less complicated than dealing with banks or in an informal setting. A Nidhi Company enables its members to unlock the potential of their money and gain from lower interest rates when they require money themselves.
- At least seven members are mandatory to form a Nidhi company. Out of these, three should be designated as the directors. However, it should acquire a minimum of 200 members within one year of commencement.
- Moreover, the company should have a minimum equity share capital of Rs 5 lakhs, for registering as a Nidhi Company. This entire amount has to be paid up. However, the Net Owned Funds (NOF) must be increased to Rs 10 lakhs within a year of registration.
- a.At least 10% of its outstanding deposits should comprise of un-encumbered term deposits.
- b.The prescribed NOF to deposits ratio should be 1:20.
- At least 10% of its outstanding deposits should comprise of un-encumbered term deposits
- The prescribed NOF to deposits ratio should be 1:20. where 10% of the total deposits are in a fixed deposit account of a nationalized bank.
What are the 10 things Nidhi Companies cannot do as an NBFC (Non-Banking Financial Company)?
A Nidhi company cannot deal in the following –
- Chit fund business
- Hire purchase finance
- Acquisition/insurance of securities issued by any corporate
- Engaging as an NBFC in the business of advances or loans
- Leasing finance
- Acquisition of stocks/shares /bonds/securities/debentures issued by any local authority /Govt./marketable securities
Procedure for Nidhi Company Registration By ACTOLEGAL
Contrary to what you might think, registering a Nidhi Company is a simple 3-Step process and can be done completely online. We’ve laid it out below.
- Name Reservation – We help you reserve your name with MCA.
- DSC and DINs – We help you get 1 DSC and 3 DINs.
- Documents and approval – We help you at every stage of the documentation process and in getting in-principle approval from the RBI.
Documents Required for Nidhi Company Registration
To Be Submitted By All Directors
- Self-attested copy of PAN Card
- Self-attested copy of Driver’s License/ Voter ID/ Aadhaar Card/Passport
- Self-attested copy of Bank Statement/ Telephone Bill/Mobile Bill/ Electricity Bill
- Passport-size Photograph
- Specimen Signature Certificate
Why ACTOLEGAL?
We provide specialist and technical advice based on commercial experience that does not cost the earth. We seek long term relationships with our clients and contacts and understand the importance of providing advice in a proactive and personal way. We are trusted by our clients to manage complex and valuable transactions because we know and understand them, their aims and objectives. We work with our clients as part of their expanded in house team and help them to be more successful. We look forward to working with you.
FAQ about Nidhi-Company
Nidhi Company is a company involved in borrowing and lending money to its members. It is a type of Non-Banking Financial Company (NBFC) and is mainly created to instill thrift and saving habits among its members. Its dealings are limited to its members only.
The company must apply in Form NDH-4 with a minimum of 200 persons as members and Net owned fund of Rs 20 lacs within 120 days from the date of its incorporation. The company shall also attach the declaration of the fulfilment of fit and proper person criteria by all the directors and the promoters of the company.
A Nidhi company is a company that is recognized under section 406 of the Companies Act, 2013 read with Nidhi Rules 2014. Their core functions are borrowing and lending money among its members and fall under the non-banking Indian finance sector
It works on the principle of mutual benefits that are regulated by the Ministry of Corporate Affairs. Nidhi Company is a class of Non-Banking Financial Company(NBFC) and Reserve Bank of India(RBI) has powers to issue directives for them related to their deposit acceptance activities.
