♦ Nidhi Company:
Nidhi Company is a form of NBFC, incorporated U/s. 406 of the Companies Act, 2013 and only public company U/r 4(1) can be declared as Nidhi Company. The Ministry of Corporate Affairs (MCA) is the body which governs Nidhi Company Rules and Regulations. Reserve Bank of India directs its deposit acceptance activities and issues new amendments for proper regulations. A Nidhi Company usually gets associated with the Benefit Funds, Permanent Fund, Mutual Benefit Company and Mutual Benefit Funds.
♦ Section 406 – Power to Modify Act in its Application to Nidhis:
(1) In this section, “Nidhi” or “Mutual Benefit Society” means a company which the CG may, by notification in the Official Gazette, declare to be a Nidhi or Mutual Benefit Society, as the case may be.
(2) The CG may, by notification in the Official Gazette, direct that any of the provisions of this Act specified in the notification:
√ shall not apply to any Nidhi or Mutual Benefit Society; or
√ shall apply to any Nidhi or Mutual Benefit Society with such exceptions, modifications and adaptations as may be specified in the notification.
(3) A copy of every notification proposed to be issued U/s. 406(2), shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days, and if, both Houses agree in disapproving the issue of notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by both the Houses
(4) In reckoning any such period of 30 days as is referred to in section 406(3), no account shall be taken of any period during which the House referred to in section 406(3) is prorogued or adjourned for more than 4 consecutive days
(5) The copies of every notification issued under this section shall, as soon as may be after it has been issued, be laid before each House of Parliament.
♦ Nidhi Company Rules and Regulations (Annual Compliances)
Every company registered U/s 406 of the Companies Act, 2013 must adhere to compliances, which are:
√ Maintaining a minimum of 200 members within one year of incorporation, and
√ Not maintaining the NOF to deposit ratio of 1:20.
♦ Rule 2 – Application:
These rules shall apply to:
(a) every company which had been declared as a Nidhi or Mutual Benefit Society (MBS) U/s. 620A(1) of the Companies Act, 1956;
(b) every company functioning on the lines of a Nidhi company or MBS but has either not applied for or has applied for and is awaiting notification to be a Nidhi or MBS U/s. 620A(1) of the Companies Act, 1956; and
(c) every company incorporated as a Nidhi pursuant to the provisions of section 406 of the Act.
(d) every company declared as Nidhi or MBS U/s. 406(1) of the Act.
♦ Rule 3 – Definitions:
(1) In these rules, unless the context otherwise requires:
(a) “Act” means the Companies Act, 2013;
(b) “Doubtful Asset” means a borrowal account which has remained a nonperforming asset:
(c) “Loss Asset” means a borrowal account which has remained a non-performing asset:
a shortfall in the recovery of the loan account is expected because the documents executed may become invalid if subjected to legal process or for any other reason;
(d) “Net Owned Funds (NOF)” means:
Provided that the amount representing:
(da) “Nidhi” means:
(e) “Non-Performing Asset” means:
(f) “Standard Asset” means the asset in respect of which no default in repayment of principal or payment of interest has occurred or is perceived and which has neither shown signs of any problem relating to repayment of principal sum or interest nor does it carry more than normal risk attached to the business;
(g) “Sub-Standard Asset” means a borrower account which is a non performing asset:
Provided that reschedulement or renegotiation or rephasement:
♦ Rule 3A – Declaration of Nidhis:
The CG, on receipt of application (in Form NDH-4 along with fee thereon),
Provided that a Nidhi incorporated under the Act on or after the commencement of the Nidhi (Amendment) Rules, 2019,
(a) 1 year from the DOI or
(b) the period up to which extension of time has been granted by the Regional Director U/r. 5(3):
Provided further that nothing in the first proviso shall prevent a Nidhi from filing Form NDH-4 before the period referred therein:
Provided also that that in case a company does not comply with the requirements of this rule, it shall not be allowed to file:
♦ Rule 4 – Incorporation and Incidental Matters:
(1) A Nidhi shall be:
(2) On and after the commencement of the Act, no Nidhi shall issue preference shares.
(3) If preference shares had been issued by a Nidhi before the commencement of this Act,
(4) Except as provided under the proviso to rule 6(e), no Nidhi shall have any object in its Memorandum of Association other than:
(5) Every “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.
♦ Rule 5 – Requirements for Minimum Number of Members, NOF, etc.:
(1) Every Nidhi shall, within a period of 1 year from the DOI, ensure that it has:
(a) Minimum 200 members;
(b) NOF’s of Rs. 10,00,000/- or more;
(c) unencumbered term deposits of Minimum: 10% of the outstanding deposits as specified in rule 14; and
(d) ratio of NOF to deposits of Maximum – 1:20.
(2) Within 90 days from the close of the first financial year after its incorporation and where applicable, the second financial year,
(3) If a Nidhi is not complying with rule 5(1) (a) or (d) above,
Provided that the Regional Director may extend the period upto 1 year from the date of receipt of application
Explanation: For the purpose of this rule “Regional Director” means the person appointed by the CG in the MCA as a RD;
(4) If the failure to comply with rule 5(1) of this rule extends:
♦ Rule 6 – General Restrictions or Prohibitions:
No Nidhi shall:
(a) carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by anybody corporate;
(b) issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever
(c) open any current account with its members;
(d) acquire another company:
Explanation: For the purposes of this rule 6, “control” shall have the same meaning assigned to it in section 2(27) of the Act;
(e) 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:
(f) accept deposits from or lend to any person, other than its members;
(g) pledge any of the assets lodged by its members as security;
(h) take deposits from or lend money to anybody corporate;
(i) enter into any partnership arrangement in its borrowing or lending activities;
(j) 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.
(k) pay any brokerage or incentive for mobilising deposits from members or for deployment of funds or for granting loans.
♦ Rule 7 – Share Capital and Allotment:
(1) Every Nidhi shall issue fully paid up equity shares of the nominal value of not less than Rs. 10/-each:
Provided that this requirement shall not apply to a company referred to in rule 2 (a) and (b).
(2) No service charge shall be levied for issue of shares.
(3) Every Nidhi shall allot to each deposit holder at least a minimum of 10 equity shares or shares equivalent to Rs. 100/-:
Provided that a savings account holder and a recurring deposit account holder shall hold Minimum one equity share of Rs. 10/-.
♦ Rule 8 – Membership:
(1) A Nidhi shall not admit a body corporate or trust as a member.
(2) Except as otherwise permitted under these rules, every Nidhi shall ensure that its membership is not reduced to less than 200 members at any time.
(3) A minor shall not be admitted as a member of Nidhi:
Provided that deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.
♦ Rule 9 – Net Owned Funds:
Every Nidhi shall maintain NOF’s (excluding the proceeds of any preference share capital) of Minimum Rs. 10,00,000/- or such higher amount as the CG may specify from time to time.
♦ Rule 10 – Branches:
(1) A Nidhi may open branches, only if it has earned net PAT continuously during the preceding 3 financial years.
(2) Subject to the provisions contained in rule 10(1), a Nidhi may open up to 3 branches within the district.
(3) If a Nidhi proposes to open more than 3 branches within the district or any branch outside the district,
(4) No Nidhi shall open branches or collection centres or offices or deposit centres, or by whatever name called,
(5) No Nidhi shall open branches or collection centres or offices or deposit centres, or by whatever name called,
(6) A Nidhi shall not close any branch unless it-
(a) publishes an advertisement in a newspaper in vernacular language,
(b) fixes a copy of such advertisement or a notice informing such closure of the branch on the notice board of Nidhi
(c) gives an intimation to the Registrar within 30 days of such closure.
♦ Rule 11 – Acceptance of Deposits by Nidhis:
(1) A Nidhi shall not accept deposits exceeding 20 times of its NOF’s as per its last audited financial statements.
(2) In the case of companies covered U/r 2 (a) and (b) and existing on or before 26th July, 2001 and which have accepted deposits in excess of the aforesaid limits, the same shall be restored to the prescribed limit by increasing the NOF’s position or alternatively by reducing the deposit according to the table given below:
|SL.No.||Ratio of NOF’s to Deposits (as on 31.3. 2013)||Date by which the company has to achieve prescribed ceiling of 1:20|
|a.||More than 1:20 but upto 1:35||By 31.3. 2015|
|b.||More than 1:35 but upto 1:45||By 31.3. 2016|
|c.||More than 1:45||By 31.3. 2017|
(3) The companies which are covered under the Table in rule 11(2) above:
(4) The ratio specified in rule 11(2) above shall also apply to incremental deposits.
♦ Rule 12 – Application Form for Deposit:
(1) Every application form for placing a deposit with a Nidhi shall contain the following particulars, namely:-
(a) Name of Nidhi;
(b) Date of incorporation of Nidhi;
(ba) The date of declaration or notification as Nidhi
(c) The business carried on by Nidhi with details of branches, if any;
(d) Brief particulars of the management of Nidhi (name, addresses and occupation of the directors, including DIN);
(e) Net profits of Nidhi before and after making provision for tax for the preceding three financial years;
(f) Dividend declared by Nidhi during the preceding three financial years;
(g) Mode of repayment of the deposit;
(h) Maturity period of the deposit;
(i) Interest payable on the deposit;
(j) The rate of interest payable to the depositor in case the depositor withdraws the deposit prematurely;
(k) The terms and conditions subject to which the deposit may be accepted or renewed;
(l) A summary of the financials of the company as per the latest two audited financial statements as given below:
(ii) Deposits accepted
(iii) Deposits repaid
(iv) Deposits claimed but remaining unpaid
(v) Loans disbursed against:
√ immovable property;
√ deposits; and
√ gold and jewellery
(vi) Profit before tax
(vii) Provision for tax
(viii) Profit after tax
(ix) Dividend per share
(m) any other special features or terms and conditions subject to which the deposit is accepted or renewed.
(2) The application form shall also contain the following statements, namely:-
(a) in case of non-payment of the deposit or part thereof as per the terms and conditions of such deposit,
(b) in case of any deficiency of Nidhi in servicing its depositors,
(c) a declaration by the Board of Directors to the effect that the financial position of Nidhi as disclosed and the representations made in the application form are true and correct and that Nidhi has complied with all the applicable rules;
(d) a statement to the effect that the CG does not undertake any responsibility for the financial soundness of Nidhi or for the correctness of any of the statement or the representations made or opinions expressed by Nidhi;
(e) the deposits accepted by Nidhi are not insured and the repayment of deposits is not guaranteed by either the CG or the Reserve Bank of India; and
(f) a verification clause by the depositor stating that he had read and understood the financial and other particulars furnished and representations made by Nidhi in his application form and after careful consideration he is making the deposit with Nidhi at his own risk and volition.
(3) Every Nidhi 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.
(4) For the purposes of introduction of depositors, a Nidhi shall obtain documentary evidence of the depositor in the form of proof of identity and address as under:
(a) Proof of Identity (any one of the following):
√ Unique Identification Number
√ Income-tax PAN card
√ Elector Photo Identity Card
√ Driving licence
√ Ration card
(b) Proof of address (any one of the following):
√ Unique Identification Number
√ Elector Photo Identity Card
√ Driving licence
√ Ration card
√ Telephone bill
√ Bank account statement
√ Electricity bill
(documents referred to serial numbers (vi), (vii) and (viii) above shall not be more than two months old)
♦ Rule 13 – Deposits:
(1) The fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of 60 months.
(2) Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period of 60 months.
(3) 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 by Nidhi.
(4) The maximum balance in a savings deposit account at any given time qualifying for interest:
(5) A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding the maximum rate of interest prescribed by the Reserve Bank of India which the NBFC’s can pay on their public deposits.
(6) A fixed deposit account or a recurring deposit account shall be foreclosed by the depositor subject to the following conditions, namely:-
(a) a Nidhi shall not repay any deposit within a period of 3 months from the date of its acceptance;
(b) where at the request of the depositor,
(c) where at the request of the depositor,
from the rate which Nidhi would have ordinarily paid, had the deposit been accepted for the period for which such deposit had run:
Provided that in the event of death of a depositor,
with interest up to the date of repayment at the rate which the company would have ordinarily paid, had such deposit been accepted for the period for which such deposit had run.
♦ Rule 14 – Un-encumbered Term Deposits:
Every Nidhi shall invest and continue to keep invested,
Provided that in cases of unforeseen commitments,
♦ Rule 15 – Loans:
(1) A Nidhi shall provide loans only to its members.
(2) The loans given by a Nidhi to a member shall be subject to the following limits, namely:-
(a) Rs. 2 lakh, where the total amount of deposits of such Nidhi from its members is less than Rs. 2 crore;
(b) Rs. 7.5 lakh, where the total amount of deposits of such Nidhi from its members is more than Rs. 2 crore but less than Rs. 20 crore;
(c) Rs. 12 lakh, where the total amount of deposits of such Nidhi from its members is more than Rs. 20 crore but less than Rs. 50 crore; and
(d) Rs. 15 lakh, where the total amount of deposits of such Nidhi from its members is more than Rs. 50 crore:
Provided that where a Nidhi has not made profits continuously in the 3 preceding financial years,
Provided further that a member shall not be eligible for any further loan:
(3) For the purposes of rule15(2), the amount of deposits shall be calculated on the basis of the last audited annual financial statements.
(4) A Nidhi shall give loans to its members only against the following securities, namely:-
(a) gold, silver and jewellery:
Provided that the repayment period of such loan shall not exceed 1 year
(b) immovable property:
Provided that the total loans against immovable property [excluding mortgage loans granted on the security of property by registered mortgage,
(c) fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies:
Provided that such securities duly discharged shall be:
Provided further that in the case of loan against fixed deposits,
♦ Rule 16 – Rate of Interest:
The rate of interest to be charged on any loan given by a Nidhi shall:
Provided that Nidhi shall charge the same rate of interest on the borrowers,
♦ Rule 17 – Rules Relating to Directors:
(1) The Director shall be a member of Nidhi.
(2) The Director of a Nidhi shall hold office for a term up to 10 consecutive years on the Board of Nidhi.
(3) The Director shall be eligible for re-appointment only after the expiration of 2 years of ceasing to be a Director.
(4) Where the tenure of any Director in any case had already been extended by the CG, it shall terminate on expiry of such extended tenure.
(5) The person to be appointed as a Director shall comply with the requirements of section 152(4) of the Act and shall not have been disqualified from appointment as provided in section 164 of the Act.
♦ Rule 18 – Dividend:
A Nidhi shall not declare dividend:
for reasons to be recorded in writing and further subject to the following conditions, namely:
√ an equal amount is transferred to General Reserve;
√ there has been no default in repayment of matured deposits and interest; and
√ it has complied with all the rules as applicable to Nidhis.
♦ Rule 19 – Auditor:
Provided that an auditor (whether an individual or an audit firm):
Explanation: For the purposes of this proviso:
√ appointment includes re-appointment
♦ Rule 20 – Prudential Norms:
(1) Every Nidhi shall adhere to,
(2) Income including interest or any other charges on non-performing assets,
(3) (a) In respect of mortgage loans, the classification of assets and the provisioning required shall be as under:
|Nature of Asset||Provision Required|
|Standard Asset||No provision|
|Sub-Standard Asset||10% of the aggregate outstanding amount|
|Doubtful Asset||25% of the aggregate outstanding amount|
|Loss Asset||100% of the aggregate outstanding amount|
Provided that a Nidhi may make provision for exceeding the percentage specific herein
(b) The estimated realisable value of the collateral security to which a Nidhi has valid recourse,
(4) In case of companies which were incorporated on or before 26-07-2001, such companies shall make provisions in respect of loans disbursed and outstanding as on 31-03-2002 for income reversal and non-performing assets as per table given below:
|For the year ended||Extent of provision|
|Un-provided balance on equal basis over the 3 years as specified in the preceding column.|
(5) (a) The Notes on the financial statements of a year shall disclose:
√ the total amount of provisions, if any, to be made on account of income reversal and non-performing assets remaining unrealised;
√ the cumulative amount provided till the previous year;
√ the amount provided in the current year; and
√ the balance amount to be provided.
(b) Such disclosure shall continue to be made until the entire amount to be provided has been provided for.
(6) In respect of loans against gold or jewellery-
√ the aggregate amount of loan outstanding against the security of gold or jewellery shall,
√ if the loan is not recovered or renewed and the security is not sold within the aforesaid period of 3 months,
√ no income shall be recognised on such loans outstanding
√ the loan to value ratio shall not exceed 80 percent.
Explanation: For the purposes of this rule, the term ‘loan to value ratio’ means:
♦ Rule 21 – Filing of Half Yearly Return:
Every company covered U/r 2:
♦ Rule 22 – Auditor’s Certificate:
The Auditor of the company shall furnish a certificate:
♦ Rule 23 – Power to Enforce Compliance:
(1) For the purposes of enforcing compliance with these rules,
(2) In respect of any Nidhi
the CG may appoint a Special Officer to take over the management of Nidhi and such Special Officer shall function as per the guidelines given by CG:
Provided that an opportunity of being heard shall be given to the concerned Nidhi by the CG before appointing any Special Officer
♦ Rule 23A – Compliance with rule 3A by certain Nidhis:
Provided that in case a company does not comply with the requirements of this rule, it shall not be allowed to file Form No. SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of Allotment)
♦ Rule 23B – Companies declared as Nidhis under previous company law to file Form NDH-4:
Every company referred in rule 2(a) shall file Form NDH-4 along with fees as per the Companies (Registration Offices and Fees) Rules, 2014 for updating its status:
Provided that no fees shall be charged under this rule for filing Form NDH-4, in case it is filed within 9 months of the commencement of Nidhi (Amendment) Rules, 2019:
Provided further that, in case a company does not comply with the requirements of this rule, it shall not be allowed to file Form No.SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of Allotment)
♦ Rule 24 – Penalty for Non-compliance:
If a company falling U/r 2 contravenes any of the provisions of the rules prescribed herein, the company and every officer of the company who is in default shall be punishable with fine:
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