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Concept of Nidhi Company
Nidhi Companies is one of the classes of non-banking financial companies that are engaged to promote the saving of its members and operates on the principle of mutual benefits. Nidhi Company doesn’t require any approval from RBI and thus get quickly formed as it is registered online through MCA.
Nidhi Companies operates in lending and collecting activities. It collects the fund in the form of Recurring Deposit and Fixed Deposit from its members as well as it lends its members against gold, shares, bonds, etc.
Nidhi Companies are the form of a public company, and the name of such company shall end with words "Nidhi Limited". In this article, we will study about Nidhi Companies in brief along with the activities performed by it.
Prohibition on Nidhi Company
No company operating as Nidhi Company can function as a chit-fund, hire-purchase, lease, insurance or securities business. Nidhi Companies are prohibited from the activities of fund lending or accepting a deposit to a person other than its members. These companies can’t indulge in any advertising on the acceptance of deposits.
Conditions to be fulfilled for Registration of Nidhi Company
Following are the certain key-points for better understanding of Nidhi Company Registration:
- Nidhi Company shall be incorporated by at least seven members amongst whom three members shall be directors.
- Nidhi Company shall start with minimum INR 5 Lakhs of equity share capital. Nidhi Company is not allowed to issue preference shares.
- Nidhi Company shall increase up to a minimum of 200 members within one year from the commencement of business.
- Net owned fund of Nidhi Company shall be INR 10 Lakhs or more.
- Net owned fund to deposit ratio shall not be above of 1:20.
- The unencumbered deposit shall be more than 10% of its outstanding deposits.
- Nidhi Company shall within 90 days from the end of 1st financial year after its incorporation shall file Form- NDH-1. The form must be duly certified by CA/CS/CWA.
- The extension can be availed of another financial year by submitting form NDH-2 to the regional director within 30 days of closure of the first financial year.
Nidhi Company Online Registration
Nidhi companies are regulated under the Companies Act 2013 and are incorporated online through the MCA website. Nidhi Company registration process is easier and hustles free as compared to the NBFC Registration Process.
This form of NBFC specifies no minimum qualification requirement for directors or any other such similar criteria. Besides, unlike other NBFCs, Nidhi Company not requires any prior approval from RBI for its incorporation.
Main Objectives of Nidhi Company
Nidhi Companies incorporates by achieving the following objectives:
- To cultivate the habit of savings: Nidhi Company accepts the deposit from its members just like the banks for promoting saving money habits amongst its members.
- Loan to members: Nidhi Company is permitted to give credits or accepts deposits only from its members.
- The safest mode of funds: Nidhi Company is the most reliable and cheap source of procuring funds with ease from the common public who can be registered as its members.
- Rural banking services: These companies provide rural banking services to the rural areas or to places with remote population those are devoid of banking services and NBFCs.
Benefits of Nidhi Company Registration
Following are advantages Nidhi Company enjoys over the other forms of NBFCs:
- Nidhi Company is the substitute to co-operative society and thus enjoys the benefits of co-operative society as well as advantages of double deposits.
- Members of Nidhi Company can borrow money from its own company with ease compared to borrowing from other banks and financial institution
- Nidhi Company encourages the habit of savings and operates with the goals of mutual benefit.
- As the Nidhi Company borrows or lends to its members, the processing is less complicated than compared to banks.
- Nidhi Company is regulated by Nidhi Rules 2014, and thus RBI imposes limited implications on Nidhi Company.
- Nidhi Companies, unlike other NBFCs, don't require any RBI approval and thus are easily incorporated through MCA regulations.
Conclusion
In the era of ever-growing corporate sectors with vast diversification & options to choose from, one can select Nidhi Company as it indulges and operates on the principle of mutual benefits of both, i.e. owner as well as members.
Contact us for any further inquiries and a better understanding of Nidhi Company & its related compliance.
Source: https://legalsworld.blogspot.com/2019/11/what-is-process-of-online-nidhi-company.html
