Nidhi company

A nidhi company is a type of company in the Indian non-banking finance sector, recognized under section 406 of the Companies Act, 2013.^[1] Their core business is borrowing and lending money between their members. They are also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company. They are regulated by Ministry of Corporate Affairs. Reserve Bank of India is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these companies deal with their shareholder-members only. Nidhi means a company which has been incorporated with the object of developing the habit of thrift and reserve funds amongst its members and also receiving deposits and lending to its members only for their mutual benefit.

Frequently Asked Questions about Nidhi Company Registration

Ques: What is Nidhi Company?

A Nidhi Company is approved under section 406 of the Companies Act 2013 and belongs to the non-banking Indian finance sector. Their business includes lending and borrowing money among members. They are also called benefit funds, permanent fund, mutual benefit company and mutual benefit funds. They are governed by Ministry of Corporate Affairs. Reserve Bank of India has the authority to issue directions related to activities to take deposit. These companies manage their shareholder members only.

Ques: Why Nidhi Company should be registered?

Low mobilization of deposits

Perfect for middle and lower-income groups

Loan at lower interest rates

Secured and on-time returns

There is not any extra interference

Ques: What are the post-incorporation needs for Nidhi Company?

Following conditions should be fulfilled within 1 year since when the company is commenced :

Minimum 200 shareholders are needed

At least Rs 10 lakh net owned fund is required

At least 10% of the unpaid deposits should be taken as encumbered deposits

Deposits cannot be accepted by company exceeding 20 times of net owned fund

Ques: What is known as DIN?

Director Identification Number or DIN is allotted to a potential director or an existing director of any company that gets incorporated or to be incorporated. Ministry of Corporate Affairs issues DIN which is unique identification number.

Ques: What is called DSC?

Digital signature certificate denotes signing the important documents by an authorized individual digitally or electronically. This is used for signing the electronic forms only. It is not applicable for physical documents.

Ques: Can Minor become a director?

No, Minor cannot be a director as DIN is essential. To obtain a DIN, an individual should be at least 18 years or above.

Ques: Can foreign nationals or NRI be a director of an Indian organization?

Yes, foreign nationals or NRIs can be a director and shareholder of an Indian organization. The company should include at least one Indian resident as a Director on the Board of Directors.

Ques: Can a salaried individual be a director of a company?

Yes, a salaried individual can be a director of an organization if he is allowed by the employment agreement.

Ques: What is known as Authorized Capital?

It includes maximum acceptable amount of share capital which can be issued to shareholders by a company. Authorized share capital can be changed by a company when it is needed from time to time. It depends on the need of the organization subject to approval of members or shareholders.

Ques: What is meant by Paid-up capital?

Paid-up share capital is called Issued share capital of the Organization. This is an amount of shares issued to the share holders by an organization.

Ques: What is known as Registered Office?

The registered office of an organization is the main place of a company to do business. This place is used for sending entire official correspondence.

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Ques: What is called MoA (Memorandum of Association)?

As par Section 2(56) of the Company Act, 2013, the term "Memorandum" denotes a company's memorandum of association. This is alerted from time to time following any past company law or of the Act. This is a charter document of an organization that includes essential details of the company.

Ques: What is known as Articles of Association?

Articles of Association are by-laws of an organization. This includes Rules and Regulation pursued by the organization. It incorporates duties, objectives and authorities of the Board of Director like voting rights, borrowing capacity, process to issue and transfer of shares.

Ques: Is it possible to enhance Paid-Up Capital and Authorized Capital after completing of incorporation procedure?

Yes, Paid-up capital and authorized capital can be enhanced after incorporation procedure.

Ques: Are Nidhi Companies controlled by Reserve Bank of India?

No, the registration and regulation procedure of Nidhi Company is not controlled by core provisions of Reserve Bank of India.

Ques: How Nidhi Company Registration procedure is different from other NBFCs registration process?

RBI does not control Nidhi companies and its registration needs a smaller amount of capital. In case of NBFCs, the need of paid capital is 2 crore.

Ques: What is known as regulatory authority of Nidhi Company?

Registration and regulation of Nidhi Company is managed by Ministry of Corporate Affairs. According to the Provisions of Nidhi Rules, 2014, all the activities are completed.

Ques: What is meant by Nidhi Rules?

Nidhi Companies are not controlled by RBI. Therefore to make transparent and easy operations of Nidhi Company, Nidhi Rules 2014 has been introduced by Central Government. Governing principles for Nidhi Company operations are included in these rules.

Ques: From whom deposits can be taken by a Nidhi Company?

Once registration of Nidhi Company is completed, deposits can only be accepted from the registered members.

Ques: Who can be a member of Nidhi Company?

Following criteria are to be satisfied in order to be a member of Nidhi Company :

The member must be at least 18 years or more.

No trust or corporate body can become a member. Member should be an individual.

Ques: Is RBI approval is necessary to continue business after the registration of Nidhi Company?

Approval of RBI is not compulsory for them. Once registration of Nidhi Company is completed, business can be started.

Ques: Is Micro Finance Business conducted by Nidhi Company in India?

The term microfinance denotes small credit facility. This is well-known business entity in rural and semi-urban places. However RBI approval is compulsory to perform microfinance business. Any big NBFCs can do this.

Ques: Whether debt securities or preference shares can be issued by Nidhi Company?

No. Following securities cannot be issued by Nidhi Companies :

Debentures

Preference Shares

Other Debt Securities

Ques: Is there any limit of loan that a Nidhi Company can offer to its members?

In case of Nidhi Company, loan limit depends on the amount of deposits that it keeps. Specified limits are as follows :

DEPOSIT AMOUNT (RS)	LIMIT OF LOAN (RS)
Less than 2 Crore	200000
2 Crore to 20 Crore	750000
20 Crore to 50 Crore	1200000
More than 50 Crore	1500000

Ques: Whether Nidhi Company Operation is allowed in two states?

Nidhi Company is not allowed to perform its operation outside the state where it is registered in.

Ques: What are the minimum needs when the registration of Nidhi Company is completed?

Once registration procedure of Nidhi Company is done, following needs are to be met within one year :

At least Rs 10 lakh should be maintained as net owned funds

Minimum 200 members should be registered

Out of entire unpaid deposits, 10% should be unencumbered term deposits

The ratio of net owned funds to deposit must be 1:20

Ques: Is it legitimate to advertise the activities of a Nidhi Company?

No, Nidhi Company is not allowed to advertise its activities. The main aim of Nidhi is to facilitate the habits of saving and thrift among the members. It prevents request for deposits to non-members through promotions.

Nidhi Company cannot remit any type of incentive or brokerage in order to promote grant of loan or mobilization of deposits to members.

Ques: Can a Nidhi Company buy securities of other company?

No, Nidhi Company cannot buy shares or securities of other company or institutions.

Ques: Can a current account be opened by a Nidhi Company with its members?

No, Nidhi Company cannot open a current account with the members.

Ques: Is it possible to acquire another company by a Nidhi Company?

No, Nidhi Company is not permitted to do that through buying its securities. It does not have power to access its management or modify the components of its management.

For such activity, prior approval of regional director is to be obtained after a special resolution is passed in general meeting.

Ques: Is there any task performed by a Nidhi Company except borrowing and lending permitted by law?

No, Nidhi Company is not allowed to perform any other type of task on its own name except borrowing and lending.

Ques: Is there any restriction to open another branch of Nidhi Company?

Yes, it cannot open another branch till a net profit after paying tax is earned consecutively for 3 years since when its registration is completed.

Ques: What is the number of branches opened by a Nidhi Company?

Once the criteria of earning profits for 3 consecutive years are fulfilled, 3 branches can be opened by a Nidhi Company. The branches must be in the same district where the registration of Nidhi Company is completed.

If more branches are to be opened outside or inside the district, it is compulsory to get previous permission from the regional director.

Ques: Whether unsecured loans can be issued by Nidhi Company?

No, only secured loans can be issued by Nidhi Company to its members.

Ques: What types of securities are needed by Nidhi Company to issue loans to its members?

Following securities are required by Nidhi Company to issue secured loans to its members :

Immovable Property

Gold, Silver and other valuable metals including jewelry

National saving certificate, government securities, fixed deposit receipts, insurance policies and others

Ques: Which loans cannot be issued by Nidhi Company?

Following kind of loans cannot be issued by Nidhi Company :

Vehicle / Asset finance

Personal Loans

Hire-purchase

Microfinance

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NIDHI COMPANY REGISTRATION ONLINE

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procedure Nidhi Company Registration Process

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