Acceptance of Deposits By Nidhi Companies

Nidhi Company means a Company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and saving amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.

The provisions of the Companies Act, 2013 places various restrictions on acceptance of deposits by Companies in order to promote public interest; however, in order to promote savings, especially in rural areas where people do not have access to organized sector of depositing money i.e. Banks and Non-Banking Financial Companies in particular, it came up with the concept of Nidhi Companies. However, the Nidhi Rules, 2014 places certain important points to be kept in mind by Nidhi Companies before accepting deposits from its members and in this article, we shall discuss about the “Acceptance of Deposits by Nidhi Companies”.

GENERAL PROHIBITIONS/RESTRICTIONS FOR ACCEPTANCE OF DEPOSITS :-

1. It should accept deposits from its members only;

2. It shall not take deposits from any Body corporate;

3. Deposits shall not be accepted from any minor. Further, that the deposits may be accepted in the name of the minor, if they are made through legal or natural guardian of the minor.

4. It shall not enter into any partnership arrangement for borrowing or lending activities;

5. It shall not issue any advertisement in any form for soliciting deposits;

6. It shall not pay any brokerage or incentive for mobilizing deposits from its members.

7. It shall allot to each deposit holder at least a minimum of ten equity shares or shares equivalent to one hundred rupees.

8. It shall obtain documentary evidence as identity and residence proof from its members as mentioned in the rules.

9. It shall not open branches or collection centres or offices or deposit centres, or by whatever name called outside the State where its registered office is situated or unless financial statement and annual return are filed with the Registrar.

APPLICATION FORM: – 

1. Every application form accepting deposits shall include:

• Basic Details of the Nidhi such as name, date of incorporation, etc.
• Particulars of Management.
• Net Profit and Dividend for preceding 3 years.
• Maturity period along with the rate of interest.
• Other such terms and conditions as may be prescribed.

2. Additional Conditions that should be mentioned in the form are:-

• Provision for depositor to approach Tribunal in case of non-payment of deposit or part thereof by the Company.
• Any other deficiency on behalf of the Company shall allow depositor to approach National/State/District Consumer Redressal Forum for relief.
• A declaration by Directors as to statement mentioned in the form is true and correct.
• That the deposits are not insured or repayment is not guaranteed by Reserve Bank of India or Central Government.
• Verification clause for depositor stating or agreeing to understand all the terms and conditions mentioned in the Form.

3. Every Nidhi Company shall obtain proper introduction of new depositors before opening their accounts or accepting their deposits and keep on its record the evidence on which it has relied upon for the purpose of such introduction.

TYPES OF DEPOSITS ALLOWED:

1. Fixed Deposits

2. Recurring Deposits

3. Savings Deposits

 MAXIMUM LIMIT: –

 No Nidhi Company shall accept deposits exceeding 20 times that of its net owned funds as per its last audited financial statements.

LIMITS FOR ACCEPTING DEPOSITS AND OTHER IMPORTANT POINTS –

1. Fixed Deposit:- 

• Tenure of minimum 6 months up to 60 months.
• Rate of Interest offered shall not exceed maximum rate of interest prescribed by the Reserve Bank of India which the NBFCs can pay on their public

2. Recurring Deposit:- 

• Tenure of minimum 12 months up to 60 months.
• Rate of Interest offered shall not exceed maximum rate of interest prescribed by the Reserve Bank of India which the NBFCs can pay on their public
• In case of recurring deposits relating to mortgage loans, the maximum period of recurring deposits shall correspond to the repayment period of such loans granted.

3. Savings Deposit: – 

• The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed one lakh rupees at any point of time.
• Rate of interest shall not exceed 2% above the rate payable by nationalized banks on savings account.

FORECLOSURE OF DEPOSITS: –

A Fixed or Recurring Deposit shall be foreclosed by Depositor on such conditions:-

• That the Nidhi shall not repay within 3 months of acceptance of deposits.
• In case amount is paid after 3 months but before 6 months at the request of the depositor, no interest shall be paid up to 6 months from the date of deposit.
• In case the amount is paid after 6 months but before expiry, interest shall be reduced by 2% from the rate at which it was accepted.
• In case of death of depositor, it shall be repaid to the surviving depositor or nominee or legal heir with interest up to the date of repayment without any reduction in the interest rate.

UNENCUMBERED DEPOSITS

Every Nidhi Company shall invest in the scheduled bank account or post office at least 10% of the deposits outstanding at the close of business on the last working day of the second preceding month. For instance, in case the Nidhi Company has Rs. 20,00,000/- deposits as on last working day of March 2020, then it shall maintain unencumbered deposit of at least Rs. 2,00,000/- by May 2020 in scheduled bank account or post office.

However, it is pertinent to mention that in case of unforeseen commitments, this amount can be withdrawn temporarily on the terms and conditions as prescribed by the Regional Director after its due approval only.

{The author i.e. Kajal Goyal is a Company Secretary in Practice at Kajal Goyal and Associates and founder of Alliance Professionals and can be reached at (M) +91-9999952595 and (E) cskajalgoyal@gmail.com}