Nidhi Company is a company registered under the Companies Act, 2013, which is incorporated with a sole objective of encouraging and cultivating the habit of savings amongst its members. It’s only objective is to accept deposit and lend money in between their members.
A Nidhi company is Public Company doing limited financial transaction in between its members confined in territorial restriction. It is regulated by Ministry of Corporate Affairs under section 406 of Companies Act, 2013. The Nidhi Company is exempted from the core of the directions and regulations of the Reserve Bank of India Act, 1934 regardless of accepting of deposit and lending business.
It is allowed to accept deposit from its members and lend to its members only. Hence, the funds that are contributed in Nidhi company are only from its members and used only by its members.
Main Objectives of Nidhi Company
- Savings – Similar to banks, a Nidhi Company has a right to open Saving Accounts of its members in order to promote and encourage the habit of saving among members.
- Ease of Fund – Just like banks a Nidhi Company can also raise funds. Nidhi Company is the safest way to raise funds from the general public (just by registering them as members) though deposits, RDs (recurring deposits), FDs (fixed deposits).
- Loan – Nidhi Company is allowed to lend money to its members only. However they can provide only secured loans to its members.
- Micro Banking – There are many remote areas which still devoid of nationalised banks and NBFs. Nidhi Company is the solution to this, as it can provides rural banking services to these locations.
Why to Choose Nidhi Company
- Easily affordable, manageable and small amount of investment is required to start finance business in India.
- A Nidhi company can own property and can also incur debts.
- Change in management – It can be done easily just by filing forms to the Registrar of Companies of the respective state.
- Perpetual Succession – Just like any other company, a Nidhi company being a separate legal entity also have a benefit 'perpetual succession', i.e. it continuous existence and is unaffected by the death or departure of any member until it is legally dissolved.
- A Nidhi company being a juristic person, can buy, own property in its name.
Requirements for Nidhi Company
- The name must contain - Nidhi Limited as suffix
- A minimum paid up capital of Rs. 5,00,000/- is required
- It can’t issue preference shares.
- At least 3 Director and 7 Members is Required. All Director need to be Member of proposed Nidhi Company.
- The objective of Nidhi Company solely would be to develop habit of thrift and saving and the services of nidhi company is only restricted to its members.