Nidhi Company is a company that is registered under the companies act, 2013. It has an objective to pursue the habit of thrift and savings amongst its members. Nidhi Company is only allowed to lend and to take deposits from its members only. This is the reason funds contributed to a Nidhi company are only for the members/shareholders and can only be used by the shareholder of the company.
Though Nidhi company is similar to NBFCs (Non-banking Financial Corporation) yet very different from the NBFCs. The facets of both these corporations appear the same but they are very different from their core. They both have been the most engaging entities of Modern India. As Nidhi Company deals with its shareholders- members only. therefore, RBI (Reserve bank of India) has exempted the Nidhi companies that are notified from the core provision of the RBI act and all the other directions applicable to NBFCs. The activities of Nidhi Company are specifically related to its members. No outsider is allowed to take part in the activities of Nidhi Company because it is written in the objectives of a company that no outsider is allowed to take part in the activities of the business. This is one of the major advantages of Nidhi Company as it focuses only on the limited group of people and offers more room to expand and grow.
Nidhi companies are known under different names like Mutual fund, Benefit funds, permanent fund, and mutual benefit company. They are considered as mutual benefit societies as they are restricted to their members and also the membership is limited. The source of funds for such kinds of societies is mainly the contribution from its members. Loans are given to the members at a reasonable price and most of the loans are for the construction of houses or repairs.
Moreover, we must note that there are various advantages of forming a Nidhi Company. One of the major disadvantages is regarding credit responsibility among the members. There have been many cases where the people have borrowed the loan but haven’t paid the loan back despite the fact they were in a full capacity to pay the loan. This is a major drawback for the Nidhi Company because these people lead to breaking up of a company as other members also follow the same path. However, even though we see that Nidhi Company is one of the best entities for starting lending and borrowing among a limited group of people.
PAN card of all shareholders/directors
Copy of Voter Id card/ Aadhar card of directors
Passport size photograph of all directors and shareholders
If the property on rent then rent agreement or utility bill
NOC (No objection certificate from landlord)
Latest bank statement/telephone bill
Scan copy of the signature
Ease of formation
Unlike NBFCs, Nidhi Company does not need to obtain a license from RBI. They just have to register themselves as a public company with MCA and infuse the amount of capital as required.
Lower rate of credit
Loan given to the members of Nidhi company is at a lower rate of interest than the market which further brings greater savings to the members.
No outsider interference
Nidhi companies are formed, managed and provide mutual benefits to their members only. Any outsider is not allowed to avail of the loans and deposit money in these companies.
Help in channelizing small savings
The major aim of such companies is to promote the habit of thrift and saving among the lower and middle sections of the society.
1. Obtaining DIN (Director Identification Number)
The proposed directors who may also be the applicants of Nidhi Company have to first apply for DIN in the prescribed E-form. Such E-form has to be signed by the proposed directors by digital signature only. Therefore, one needs to get the Digital signature first.
2. Name approval
The name of the company incorporated as Nidhi shall have “Nidhi Limited" as its last words. Also, you have to provide 3 name options to MCA for Nidhi Company of which one will be selected.
3. Submission of the Incorporation documents
Once the name is approved by the ministry of corporate affairs, the applicant needs to provide the required documents for the incorporation of Nidhi Company to MCA through prescribed E-form.
4. Certificate of incorporation
After the submission of the documents and registration fee and stamp duly paid, it takes nearly 15-25 days to get the certificate of incorporation of Nidhi Company. A certificate of incorporation serves as proof that the company has been created. The certificate of incorporation contains CIN (Corporate of Identity number) of such a company.
1. What is Nidhi Company?
A Nidhi company is a company which carries on the business of lending money and accepting deposits. A Nidhi company is somewhat similar to NBFC only the difference is that Nidhi Company accepts deposits only from its members. The main aim of Nidhi Company is to work for the mutual benefits of the member.
2. What are the requirements for registering a Nidhi company anywhere in India?
Requirements for the Incorporation of Nidhi Company cover seven shareholders and a minimum of three directors. However, MOA of a Nidhi company must serve a proof regarding the fact that the ultimate goal of a proposed company is to promote the habit of savings and thriftiness among its members, and only accept the deposits and give loans to its member for their mutual benefit.
3. What are the advantages of Nidhi Company?
Limited capital requirement
Lower rate of credit
Limited RBI Regulations
4. Who can become the member/shareholder of a Nidhi company?
Any person above 18 years of age can become a member of Nidhi Company. The person should have a valid ID as well as Address proof.
5. What are the documents required for Nidhi Company?
Copy of PAN card
DSC (Digital signature certificate) of all directors
Photocopy of ID proof such as aadhar card, driving license
Address proof of a registered office (Electricity bills, telephone bills)
2 passport size photographs
6. What are the conditions for the Nidhi company for providing loans to the members?
Nidhi Company can only provide loans to the members-only when they have provided some securities like silver, gold or any type of financial securities against the loan.
7. What are the Conditions for a Nidhi Company?
Nidhi Company cannot issue securities such as debentures, preference shares,etc.
Nidhi Company is prohibited from opening any current account with its members.
It is not allowed to enter any other company
It does not have a right to enter into a partnership for lending and borrowing business.
They are not allowed to start the business of Hire purchase finance, chit funds insurance, Leasing Finance and acquisition of shares issued by companies.
8. What are the post-incorporation requirements for a Nidhi Company?
Within the period of one year after the incorporation of Nidhi company, it must satisfy the following conditions:
It should hold a minimum net owned funds of Rs. 10 lakh
Must have at least two hundred members/shareholders
The ratio of net owned funds to the deposits should not be greater than 1:20
9. Can a Nidhi company open a current account?
A Nidhi company cannot open its current account with its members as RBI exempts it to follow the procedure of banking regulation. However, Nidhi Company can open a savings bank account.
10. How can someone start a Nidhi Company in India?
It is mandatory to incorporate a limited company under the companies’ act, 2013 to start a Nidhi Company in India. Minimum of 3 to 7 shareholders are required to start an incorporation process.