What is Nidhi Company?
Nidhi Company, a non-banking finance sector company, regulated under Section 406 of the Indian Companies Act, 2013, accepts deposits from and lends to its members only, for their mutual benefit.
A Nidhi Company is a non-banking financial company (NBFC) operating in India, governed by the Nidhi Rules, 2014, and recognised under Section 406 of the Companies Act, 2013. Functioning as a public limited company, its core objective revolves around promoting thrift and savings among its members while providing financial assistance to them through lending.
To establish a Nidhi Company, a minimum of seven members are required, and the company must possess a net owned fund of at least ₹10 lakhs. Unlike other NBFCs, Nidhi Companies are limited in their operations, restricted to borrowing and lending activities among their individual members only. They cannot accept deposits from the general public or engage in other financial activities. Although exempted from RBI registration, Nidhi Companies must adhere to specific regulations provided by the Ministry of Corporate Affairs (MCA) in India.
Benefits of a Nidhi Company
Affordable Borrowing
Being a member of a Nidhi company allows individuals to borrow money at a lower rate compared to banks. This provides a significant advantage during times of financial need, as different members may require funds at various points in time.
Promotes Saving
Nidhi companies encourage all their members to save money and cultivate a frugal lifestyle. By fostering a mutual benefit society, Nidhi registration enables members to lend or borrow money and receive financial assistance among themselves.
Simplified Process
Nidhi corporation has a much simpler process than the banks or unauthorised lenders. Due to the well-organised incorporation processes, members of a Nidhi company can optimise the potential of their financial resources and have access to lower interest rates when they require cash for their own requirements.
What Is the Checklist for a Nidhi Company in India?
- In India, a minimum of seven members are needed to start a Nidhi corporation
- It needs 3 directors
- It can have upto 200 members
- A minimum equity share capital of ₹5 lakhs must be paid up in full
- Within a year of Nidhi registration, Net Owned Funds (NOF) must increase to ₹10 lakhs
- The following conditions must be met:
1. Unencumbered term deposits must make up at least 10% of the total amount of the company’s existing deposits
2. One to twenty is the suggested NOF to deposit ratio. This includes equity share capital and free reserves. It excludes accumulated losses and intangible assets - Additionally, at least 10% of the total deposits must be held in the fixed deposit account of a nationalised bank.
Things e-Nidhi Cannot do as an NBFC
Here are some activities that e-nidhi cannot engage in:
- Chit fund operations
- Rent-to-own financing
- Purchasing or insuring securities issued by any corporate body conducting advance or loan activity as an NBFC
- Leasable financing
- purchase of marketable securities, including
- Stocks, shares, bonds, and debentures, are issued by any local authority.
What is e-Nidhi Registration Process With Vakilsearch?
Step 1: Name Reservation
We help you reserve your desired name with the Ministry of Corporate Affairs (MCA).
Step 2: DSC and DINs
We assist you in obtaining 1 Digital Signature Certificate (DSC) and 3 Director Identification Numbers (DINs).
Step 3: Documents and Approval
We provide support throughout the documentation process. It helps you obtain in-principle approval from RBI.
What are Types of Documents Required for Nidhi Company Registration?
The following documents has to be submitted from all the directors
- PAN card (self-attested copy)
- Driver’s license/Voter ID/Aadhaar card/passport (self-attested copy)
- Bank statement/telephone bill/mobile bill/electricity bill (self-attested copy)
- Passport-size photograph
- Specimen signature certificate
Nidhi Company Registration Fees in India
A Nidhi business can be easily registered in India. We are a reliable company registrar who can assist you. Complete the necessary documentation, then pay the affordable e-Nidhi Company Registration fees online. You will obtain a Certificate of Incorporation as proof of the registration of your business when you register. In addition, there are Nidhi registration costs and yearly maintenance expenses, which, depending on state rules. Talk to our experts today to know more about the charges.
What Are the Latest Nidhi Company Rules?
By 2023, Nidhi firms having a share capital of ₹10 lakh or more were required to obtain a self-declaration from the central government before beginning operations. By establishing e-Nidhi Rules, Nidhi firms will be governed in a transparent, accountable, and democratic manner. Companies that match the criteria must file an application in Form NDH-4, including having a minimum of 200 members, a net owned fund of at least ₹20 lakh, and being considered as a fit and proper person. The application is judged successful after 45 days have elapsed without a response from the government. Existing Nidhi enterprises have 18 months to comply with these rules before new businesses are required to do so.
Important Facts of Nidhi Companies
- Nidhi firms can be established without the RBI’s consent
- They are established as public corporations
- The term ‘Nidhi Limited’ must be added to their name
- Nidhi companies are regulated by the RBI, similar to NBFCs
- Their primary focus is on internal loan and borrowing activities, without involving external parties
- The Nidhi Rules of 2014 permit Nidhi firms to rent out locker facilities to their members
- The rental income from lockers should not exceed 20% of the total revenue during the fiscal year.
Nidhi Company in India vs RBI Recruitment
The Reserve Bank of India (RBI) and the Nidhi Company Rules, 2014 have different responsibilities and rules. The RBI manages the financial system’s regulation in its capacity as India’s central bank. Nidhi businesses, on the other hand, are non-banking financial institutions (NBFIs) that serve the needs of its members.
In India, Nidhi firms are governed by the Nidhi Company Rules, 2014. These standards outline the specifications and rules that Nidhi firms must adhere to. They must maintain a minimum net owned fund (NOF) of ₹10 lakhs and allocate at least 10% of their resources to unencumbered term deposits in scheduled commercial banks. Nidhi firms must also adhere to a number of reporting and regulatory requirements imposed by the RBI. It is advisable to register a Nidhi company under the RBI’s guidelines to ensure compliance and avoid penalties.
Nidhi (Amendment) Rules, 2023
The Nidhi (Amendment) Rules, 2023 were introduced by the Ministry of Corporate Affairs (MCA) on 20 January 2023. These rules specifically focus on modifying the forms associated with Nidhi companies, as originally specified in the Nidhi Rules of 2014. According to these new guidelines, Forms NDH-1, NDH-2, NDH-3, and Form NDH-4 have all been revised. The Nidhi (Amendment) Rules, 2023’s Annexure contains the amended versions of these forms.
