Nidhi Company Registration

1. What is Nidhi company?

• Nidhi's literal meaning is 'fund,' 'finance or treasury'
• Nidhi Company is incorporated with the aim of developing the habit of drifting and saving and reserving funds among its members and
• also receiving deposits and loans from and to its members only for their mutual benefit.
• Although there are no separate registrations for a Nidhi company under RBI,
• RBI has the power to issue directives to them.
• Nidhi Companies are exempt from the main provisions otherwise applicable to NBFCs in India.
• It requires a minimum of 7 members and 3 directors to begin with.
• All such companies must apply the name of "Nidhi Limited."
• Within a period of one year from the beginning, every nidhi company must ensure that it has no less than 200 members.

2. What are The Annual Mandatory Compliance for Nidhi Companies?

Nidhi Companies has to mandatory file some extra forms compared to other Private or Public Companies.

• NDH 1- The Nidhi Company is required to submit the list of members within 90 days from the end of every financial year.
• NDH 2-The Company can request MCA for the extension in case Nidhi Company is not able to add 200 members in a year.
• NDH 3-Along with the above form a half yearly return is also required to be filed in Form NDH 3.
• ROC Annual Returns-It is mandatory for a Nidhi Company to file annual return with MCA through Form MGT-7.
• Profit Loss and Balance sheet-The financial statements and other related documents are required to be submitted in Form AOC-4.
• Income tax Returns-Nidhi Company is required to file annual returns by 30th September of the following financial year.

3. How is the registration of Nidhi Company different from the registration of other NBFCs?

Both of these entities are different at different levels. Nidhi is not regulated by RBI and Nidhi Company Registration requires a much smaller amount of capital than Rs. 2 Crore paid-up capital requirements for NBFCs.

4. What are Limitations or Restrictions on Nidhi Companies?

The following are some of the restrictions a Nidhi Company is subject to under Nidhi Rules, 2014. As per Rule 6 of Nidhi Rules, 2014, a Nidhi Company shall NOT:

1. Carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate;
2. Issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever;
3. Open any current account with its members;
4. Acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi;
5. carry on any business other than the business of borrowing or lending in its own name: Provided that Nidhis which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding twenty per cent of the gross income of the Nidhi at any point of time during a financial year.
6. Accept deposits from or lend to any person, other than its members;
7. Pledge any of the assets lodged by its members as security;
8. Take deposits from or lend money to any body corporate;
9. Enter into any partnership arrangement in its borrowing or lending activities;
10. Issue or cause to be issued any advertisement in any form for soliciting deposit: Provided that private circulation of the details of fixed deposit Schemes among the members of the Nidhi carrying the words “for private circulation to members only” shall not be considered to be an advertisement for soliciting deposits.
11. Pay any brokerage or incentive for mobilising deposits from members or for deployment of funds or for granting loans.

5. Is there any limitation on the maximum number of members of the Nidhi Limited?

No, the Nidhi company can have as many members as possible. However, a minimum number of 200 members will be reached within the first financial year.

6. Can Nidhi Company indulge in any activity other than lending and borrowing?

Nidhi Companies are not authorized to conduct any business of any kind other than lending and borrowing on their own behalf.

7. Can a member who has previously defaulted on a loan from Nidhi be able to borrow from Nidhi again?

No. A member who has previously defaulted on a loan from Nidhi can not borrow from Nidhi again.

8. What kind of loans can not be issued by the Nidhi Company?

The following type of loans may not be granted to Nidhi Company:

1. Personal Loans

2. Financing of assets / vehicle

3. Microfinance

4. Rental-purchase

9. Can the Nidhi Company provide a microfinance business?

No, Nidhi Company is not allowed to conduct microfinance business in India. This is because microfinance is a completely different set of business for the NBFC and requires more capital to do the same. As a result, Nidhi Company can not engage in microfinance business. Furthermore, since Nidhi Company raises funds from deposits and therefore, if it passes the same to a member without any security, there will be a high risk of default on the customer, which will ultimately result in the Nidhi Company going bankrupt.

10.What is the maximum qualifying balance for interest calculation in the savings deposit account?

The maximum balance on the savings deposit account at any time eligible for interest shall not exceed one lakh rupee and the interest rate on such deposits shall not exceed two per cent above the interest rate payable on the savings bank account by the nationalized banks.

11. Is there any restriction on the opening of the Nidhi Company's branches?

Yes, yes. It can not open another branch until it has earned net profit after tax consecutively for three straight years after the successful registration of the Nidhi Company.

After three years of continuous business profit, the Nidhi Company can open up to three branches. Furthermore, these three branches can only be opened within the district. You will also require permission from the Regional Director (RD) to open any branch outside the district.

Nor can the Nidhi Company open a branch outside the state.

12. What is the maximum amount of deposits that Nidhi Company can take?

The Nidhi Company may take up a maximum of 20 times the net-owned fund. Net-owned fund means the total fund invested by the owner less any accumulated loss. For example, if you have invested Rs.1 crore, you are entitled to raise money to Rs.20 Crore.

13. Is Nidhi Company able to market its activities?

No, as per Nidhi companies are not authorized to promote their activities through any kind of advertisement This is because the main purpose of Nidhi is to promote the habit of drifting and saving habits among its members and not to solicit deposits through promotions to non-members.

Similarly, Nidhi Company is not authorized to remit any kind of brokerage or incentive for the promotion or mobilization of deposits to members or for the granting of loans.

14. How much loan can a Nidhi Company provide to its members?

For Nidhi Company loan limit is dependent upon the amount of deposits it holds. Following are specified limits:

15. What do you mean by the Mutual Benefit Company and how it differs from the Nidhi Company?

Mutual Benefit Company is nothing but the Nidhi Company. The mutual benefit is the previous name of the company Nidhi. After 2013, it was made compulsory to use the name of Nidhi Limited instead of the Mutual Benefit for registration of Nidhi Company in India.

16. Who could become a member of the Nidhi Company?

In order to become a member of the Nidhi company, the following requirements must be met:

1. Member must be an individual, and no corporate body or trust can become a member.

2. The member must have reached the age of 18 years.