What is Nidhi Company?
Nidhi company is a company incorporated under Section 56 of Companies Act of 1956. It is a type of NBFC (Non-Banking Financial Company). The main motto of Nidhi company is to promote savings and thrift among its members. Nidhi company is most popular in South India and is more widely known under different names as Nidhi, Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company.
Nidhi business structure is limited only to its members. Receiving deposits from the members and lending of loans only to its members at reasonable interest rates for mutual benefit. Every Nidhi Company is governed by the Ministry of Corporate Affairs (MCA) and all its financial ledgers are contemplated by RBI(Reserve Bank of India).
Cheaper Interest Rates: Nidhi companies lend money at an interest comparatively lower than that of the bank loans. The mutual benefit of all the members of the company is assured as different individuals need money at different points of time.
Prudential Lifestyle: Nidhi company promotes a thrifty lifestyle amongst its members and encourages savings for the mutual benefit of each other.
Safer: Lending money to its known members are safer and involves fewer complications than that of loans of banks.
Registration of a Nidhi Company is an easy-peasy process. The process is completely online.
KYC of Directors and Members:
All the directors and members of the company must complete a KYC process. There should be at least three directors amongst the seven members.
Obtaining Digital Signature:
All the members are mandated to obtain the Digital Signature Certificate(DSC). It shall be used to digitally sign the documents.
Choosing the Name:
Three names are to be submitted to the Ministry of Corporate Affairs (MCA). Out of which MCA will choose one name for the company. The name should not resemble any previously established ventures. SPICe+ form will help in applying for the name of the company.
MoA and AoA:
Memorandum of Association and Article of Association are to be submitted. Reviewing those, Certificate of Incorporation will be issued.
Opening of Bank Account:
PAN, TAN, MoA and AoA are required to open a bank account and comply with the regulations of RBI.
Documents Required :
A registered Nidhi Company shall not indulge in the business of Chit Fund, Hire Purchase Finance, Leasing Finance, Insurance or Acquisition of Securities issued by anybody corporate.
Restrictions are placed for providing loans to the members according to the deposit acquired by the company.
1. Loan amount 2 lakhs – If the deposit is two crores.
2. A loan amount of 7.50 lakhs – If the deposit is more than two crores but less than 20 crores.
3. A loan amount of 12 Lakhs – If the deposit is more than 20 crores but less than 50 crores.
4. Loan amount 15 lakhs – If the deposit is more than 50 crores.
The dividend should not exceed 25%.
A director shall be a member of the company. Tenure of the director is 10 years. A director is only eligible for re-appointment only after 2 years of resigning from the director of the company.