Q.1 What is Nidhi Company?
- A Nidhi Company is a Company which carries on the business of accepting deposits and lending the same on demand. Nidhi Company is similar to NBFC but the only basic difference between the two is that Nidhi Companies accept deposits only from its members.
- The main aim of these companies is to work for the mutual benefit of its members. These companies are not entitled to carry on the business of Hire Purchase Financing, Insurance, Chit Funds, and Acquisition of securities or Issue of any Debt Instruments.
Q.2 What provisions are applicable to Nidhi Companies?
- As they are incorporated into the nature of Public Company so rules and regulations of Companies Act, 2013 are applicable.
- RBI provisions related to Interest rate payable on deposit are applicable to Nidhi Companies. But the core provisions of RBI are not applicable to Nidhi Companies as RBI has exempted the Nidhi Companies from the same.
- Nidhi Rules, 2014
Q.3 What are the requirements for registration of Nidhi Company in India?
Nidhi Company Registration it is to be registered as a Public Limited Company. So, to incorporate a Nidhi Company it is necessary to fulfill following criteria:
- It should have at least 3 Directors.
- It should have at least 7 Members.
- The main objective to be written in the MOA should be to cultivate the habit of thrift and savings among its members. And it can accept deposits and lend money only to its members and shall work for the mutual benefit of its members.
- It should have a minimum paid up equity share capital of 5 lakh.
- It should have “Nidhi Limited” as part of its name.
Q.4 What are post incorporation requirement of a Nidhi Company?
Once the Nidhi Company is incorporated it must fulfil the following requirements:
- It must have at least 200 members/shareholders.
- Minimum Net Owned Fund should be Rs. 10 Lakhs.
- Unencumbered term deposit must be at least 10% of the term deposit.
- The ratio of Net Owned Fund to term deposit should not be less than 1:20.
Q.5 What are the advantages offered by Nidhi Company?
The exclusive advantage which is offered by Nidhi Companies are:
- It is a single office institution governed exclusively by its members with no involvement of the third party.
- Provide loans at minimal interest rates and minimum documentation.
- Secured investments are guaranteed by such companies.
Q.6 Are the Deposits with Nidhi Company safe and secured?
Yes, the Deposits with such companies are safe and secure because the Ministry of Corporate Affairs and Reserve Bank of India has framed rules and regulations to ensure the safety and security of Deposits. The Nidhi Company compulsorily abide by the rules of Central Government.
Q.7 How the Nidhi Company utilizes the Funds procured by it?
The Nidhi Company uses the funds in lending to shareholders as per Nidhi Rules. It lends such money in the form of small loan for business and finance.
Q.8 Who can become the shareholder/member of Nidhi Company?
Any person who is above 18 years of age as per the standard age proof can become a member of the Nidhi Companies. The person desirous of becoming a member should have valid ID Proof and Address Proof.
Q.9 What are the Documents required to form a Nidhi Companies?
We have specified the relevant documents in this FAQs on Nidhi Company. Following are the documents required for Nidhi Company Registration:
- Digital Signature Certificate of all the Directors.
- Directors Identification Number of all the Directors.
- Copy of a PAN Card.
- Copy of Identity Proof (i.e. Voters ID Card, Driving License, Aadhar Card).
- 2 Passport size photographs.
- Registered Office Address Proof (Electricity Bill, Telephone Bill).
- If the registered address is a rented premise then rent agreement with rent receipt.
- No Objection Certificate.
- MOA and AOA.\
Q.10 On what condition Nidhi Company can provide a loan to its members?
Nidhi can provide loans to its members only after the members have given/ provided some securities like gold, silver jewellery or any type of financial securities against the loan.
Q.11 What are the Restrictions on Nidhi Company?
Nidhi Companies are not allowed to do the following business:
- They are not allowed to start the business of chit funds, Insurance, Hire Purchase Finance, Leasing Finance and acquisition of shares issued by companies.
- Nidhi Company cannot issue securities such as preference shares, debentures etc.
- They are prohibited from opening any current account with its members.
- It cannot enter into partnership for doing lending and borrowing business.
- It is not allowed to acquire any other company by purchasing securities or by controlling the composition of Board of Directors of other company in any way.
- It cannot carry on any business apart from borrowing or lending business in its own name.
- It cannot pledge any of the assets that is lodged by its members as security.
- Nidhi Company cannot enter into any partnership arrangement in borrowing or lending activities of its.
- It can neither issue nor cause to be issued any advertisement for soliciting deposit.
- It can’t pay any brokerage or incentive in order to mobilize deposits from members.