Nidhi Company is a company registered under the Companies Act, 2013, which is incorporated with the sole objective of encouraging and cultivating the habit of savings amongst its members. Its only objective is to accept deposits and lend money in between its members.
A Nidhi company is a Public Company doing limited financial transactions between its members confined in territorial restrictions. It is regulated by the Ministry of Corporate Affairs under section 406 of the 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 deposit and lending business.
It is allowed to accept deposits from its members and lend to its members only. Hence, the funds that are contributed to 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) through deposits, RDs (recurring deposits), and FDs (fixed deposits).
- Loan: Nidhi Company is allowed to lend money to its members only. However, they can provide only secured loans to their members.
- Micro Banking: There are many remote areas which still devoid of nationalized banks and NBFs. Nidhi Company is the solution to this, as it can provide rural banking services to these locations.
Why to Choose Nidhi Company
- Easily affordable, manageable, and small amount of investment is required to start a 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 the benefit of' 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 is a juristic person, who can buy, or own property in its name.
Requirements for Nidhi Company
- The name must contain - Nidhi Limited as the suffix
- A minimum paid-up capital of Rs. 20,00,000/- is required
- It can’t issue preference shares.
- At least 3 Directors and 7 Members are required. All directors need to be members of the proposed Nidhi Company.
- The objective of Nidhi Company solely would be to develop the habit of thrift and saving and the services of Nidhi company are only restricted to its members.