Nidhi company Meaning
Nidhi companies are a unique kind of Non-Banking Financial Companies (NBFCs) in India that are specialized in providing loans and other financial services to their members. They are regulated by the Ministry of Corporate Affairs (MCA) and have to comply with the provisions of the Nidhi Companies Rules.
Nidhi companies have been around for over a century and have been gaining popularity over the last few years due to their low-interest rates and flexible repayment options. They are considered to be a safe and reliable source of credit for individuals, as they are subject to stringent regulations. They also provide various other services such as deposits, mutual funds, and insurance products.
The primary object of Nidhis is to carry on the business of accepting deposits and lending money to member borrowers only against jewels, etc., and mortgage of property.
For over a century Nidhis, with the objective of cultivating the habit of thrift, generally promoted by public-spirited men drawn from affluent local persons, lawyers, and professionals like auditors, educationists, etc., including retired persons.
The area of operation was local – within municipalities and panchayats.
Some Nidhis on account of their financial and administrative strength opened branches within the respective revenue district and even outside.
The principle of mutual benefit has been incorporated to pool the savings from members and lend only to members and never deal with non-members.
Nidhis were not expected to engage themselves in the business of Chit Fund, hire purchase, insurance, or in any other business including investments in shares or debentures.
As stated these Nidhis do their business only with Members. Such Members are only individuals. Bodies Corporate or Trusts are never to be admitted as Members of these companies.
Origin of the Concept in India
The history of the Nidhis, their special features, their manner of functioning, their regulations, etc., have been described by the:
(i) Viswanatha Shastri Committee in 1965;
(ii) Banking Commission in 1972;
(iii) James Raj Committee in 1975;
(iv) Chakravarthy Report in 1987 ;
(v) Dr. A. C. Shah Committee in 1992.
Further, the Central Government vide Notification No.5/7/2000-CL.V dated 23rd March 2000 constituted a Committee known as Sabanayagam Committee to examine the various aspects of the functioning of Nidhi Companies and suggested an appropriate policy framework for overall improvement of the Nidhi Companies and alternative mechanism to regulate and facilitate Nidhi Companies to play key role in mobilizing and gainfully investing small savings and improving their viability, resilience and performance.
In 2005, the Expert Committee on company Law headed by Dr. Jamshed J. Irani suggested in its report on Nidhi companies as given hereunder:
NIDHI companies are effectively non-banking financial companies and are engaged in the business of accepting deposits and making loans to their members.
The recent failures in the NBFC sector also extended to the NIDHI companies compelling the Government to introduce strict prudential norms for such companies.
Whereas the deposit taking activities of NIDHIs are governed by the RBI Act and guidelines made thereunder, the power to give exemptions to the NIDHI companies in the administration of NIDHIs is with the Ministry of Corporate Affairs.
Since, RBI is the regulator of all the NBFCs incorporated under the Companies Act, the Committee felt that NIDHI companies should also be controlled by RBI through close supervision.
Exploring the Benefits of Starting a Nidhi company in India
In India, the Nidhi company is an important financial institution that provides a range of services including deposits, loans, and investments.
Although the Nidhi company is relatively new, it has become increasingly popular due to its attractive benefits and low cost of operations.
In this article, we will explore the various benefits of starting a Nidhi company in India.
The first benefit of starting a Nidhi company in India is that it is relatively easy to set up and operate.
Establishing a Nidhi company requires minimal paperwork and compliance with the Companies Act:-
The process is straightforward and requires very little legal and financial expertise. This makes it an ideal choice for entrepreneurs and small businesses who want to access the financial markets without the hassle of dealing with traditional banking channels.
The second benefit of establishing a Nidhi company is that it provides a low cost of operation. Nidhi Companies are subject to fewer regulations and are not required to meet stringent reserve requirements. This allows them to keep their costs and fees low for customers. As a result, customers can access high-quality financial services at a fraction of the cost of traditional banking services.
The third benefit of starting a Nidhi company is that it provides access to a wide range of financial instruments. Nidhi Companies are allowed to accept deposits and offer loans. They are also allowed to issue debentures and other equity instruments. This gives customers access to a variety of financial instruments that can be used to meet their needs.
Finally, starting a Nidhi company can be a great way to build a long-term business. The company can be used as an investment vehicle and can help to generate long-term returns. This can be beneficial for those looking to build wealth over the long-term.
In conclusion, starting a Nidhi company in India can be a great way to access the financial markets. It is relatively easy to set up and operate and provides a low cost of operations. It also provides access to a wide range of financial instruments and can be a great way to build a long-term business. For these reasons, establishing a Nidhi company can be an attractive option for entrepreneurs and small businesses.
Nidhi company Rules
Understanding the Nidhi company Rules
Nidhi companies are non-banking financial institutions that are registered under the Companies Act, 2013 and governed by the provisions of the Nidhi Rules.
These companies are mainly engaged in the business of lending and borrowing money between their members. Nidhi companies are required to obtain a Certificate of Commencement of Business under Section 406 of the Companies Act.
As per section 406 of the Companies Act, 2013, “Nidhi” or “Mutual Benefit Society” means a company, which the Central Government may by notification in the Official Gazette, declare to be a Nidhi or Mutual Benefit Society, as the case may be.
Nidhi” 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, and which complies with the rules made by the Central Government for regulation of such class of companies.
In exercise of powers conferred under section 406 read with section 469 of the Companies Act, 2013, Central Government issued the Nidhi Rules, 2014 which came into force on the 1st day of April, 2014. Nidhi Rules, 2014 are applicable to:
(1) every company which had been declared as a Nidhi or Mutual Benefit Society under sub-section (1) of Section 620A of the Companies Act, 1956;
(2) every company functioning on the lines of a Nidhi company or Mutual Benefit Society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under sub-Section (1) of Section 620A of the Companies Act, 1956; and
(3) every company incorporated as a Nidhi pursuant to the provisions of Section 406 of the Companies Act, 2013.
(4) every company declared as Nidhi or Mutual Benefit Society under sub-section (1) of section 406 of the Companies Act, 2013.
Declaration of Nidhis (Rule 3A of the Nidhi Rules, 2014)
The Central Government, on receipt of application (in Form NDH-4 along with fee thereon) of a public company for declaring it as Nidhi and on being satisfied that the company meets the requirements under these rules, shall notify the company as a Nidhi in the official Gazette:
Provided that a Nidhi incorporated under the Act on or after the commencement of the Nidhi (Amendment) Rules, 2019 shall file Form NDH-4 within sixty days from the date of expiry of: –
(a) one year from the date of its incorporation or
(b) the period up to which extension of time has been granted by the Regional Director under sub-rule (3) of rule 5:
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 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).
Compliance with rule 3A by certain Nidhis (Rule 23A of the Nidhi Rules, 2014)
Rule 23A of Nidhi Rules, 2014 provides that Every company referred to in clause (b) of rule 2 and every Nidhi incorporated under the Act, before the commencement of Nidhi (Amendment) Rules, 2019, shall also get itself declared as such in accordance with rule 3A within a period of one year from the date of its incorporation or within a period of nine months from the date of commencement of Nidhi (Amendment) Rules, 2019, whichever is later:
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).
Companies declared as Nidhis under previous company law to file Form NDH-4 (Rule 23B of the Nidhi Rules, 2014)
Every company referred in clause (a) of rule 2 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 nine 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).
Companies declared as Nidhis under previous company law to file Form NDH-4 (Rule 23B of the Nidhi Rules, 2014)
Every company referred in clause (a) of rule 2 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 nine 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).
Nidhi company Registration
Nidhi company Registration (Rule 4 of the Nidhi Rules, 2014)
(1) A Nidhi shall be a public company and shall have a minimum paid up equity share capital of five lakh rupees.
(2) Nidhi company shall not issue preference shares.
(3) If preference shares had been issued by a Nidhi before the commencement of the Companies Act, 2013, such preference shares shall be redeemed in accordance with the terms of issue of such shares.
(4) No Nidhi shall have any object in its Memorandum of Association other than the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.
(5) Every “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.
Requirements for minimum number of members and net owned funds (Rule 5 of the Nidhi Rules, 2014)
Sub-Rule (1) of Rule 5 of the Nidhi Rules, 2014 deals with requirements for minimum number of members, net owned fund etc.
It provides that:
Every Nidhi shall, within a period of one year from the date of its incorporation, ensure that it has–
(a) not less than two hundred members;
(b) Net Owned Funds of ten lakh rupees or more;
(c) unencumbered term deposits of not less than ten per cent of the outstanding deposits as specified in rule 14; and
(d) ratio of Net Owned Funds to deposits of not more than 1:20.
“Net Owned Funds” means the aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet. Further, the amount representing the proceeds of issue of preference shares shall not be included for calculating Net Owned Funds.
If a Nidhi is not complying with clauses (a) or (d) of sub-rule (1) above mentioned, it shall within thirty days from the close of the first financial year, apply to the Regional Director in Form NDH-2 along with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for extension of time and the Regional Director may consider the application and pass orders within thirty days of receipt of the application.
Provided that the Regional Director may extend the period upto one year from the date of receipt of application.
Where the failure to comply with sub-rule (1) above mentioned extends beyond the second financial year, Nidhi shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions contained in sub-rule (1), and gets itself declared under sub-section (1) of section 406 besides being liable for penal consequences as provided in the Act.
Return of statutory compliances by Nidhi Companies
Within ninety days from the close of the first financial year after its incorporation and where applicable, the second financial year, Nidhi shall file a return of statutory compliances in Form NDH-1 along with such fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 with the Registrar duly certified by a company secretary in practice or a chartered accountant in practice or a Cost Accountant in practice.
General restrictions or prohibitions
In terms of Rule 6, Nidhi shall not –
(a) carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body 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 by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi;
(e) carry on any business other than the business of borrowing or lending in its own name. Nidhis which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding twenty per cent of the gross income of the Nidhi at any point of time during a financial year.
(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 any body 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. It may be noted 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 mobilizing deposits from members or for deployment of funds or for granting loans.
Share capital and allotment (Rule 7 of the Nidhi Rules, 2014)
(1) Every Nidhi shall issue fully paid up equity shares of the nominal value of not less than ten rupees each.
Above requirement shall not apply to companies mentioned below:
(a) every company which had been declared as a Nidhi or Mutual Benefit Society under sub-section (1) of section 620A of the Companies Act, 1956.
(b) every company functioning on the lines of a Nidhi company or Mutual Benefit Society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under sub-section (1) of section 620A of the Companies Act, 1956.
(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 ten equity shares or shares equivalent to one hundred rupees:
It may be noted that a savings account holder and a recurring deposit account holder shall hold at least one equity share of rupees ten.
Membership of Nidhi (Rule 8 of the Nidhi Rules, 2014)
(a) A Nidhi shall not admit a body corporate or trust as a member.
(b) Every Nidhi shall ensure that its membership is not reduced to less than two hundred members at any time.
(c) A minor shall not be admitted as a member of Nidhi.
It may be noted 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.
Branches of Nidhi (Rule 10 of the Nidhi Rules, 2014)
(1) A Nidhi may open branches, only if it has earned net profits after tax continuously during the preceding three financial years. A Nidhi may open up to three branches within the district.
(2) If a Nidhi proposes to open more than three branches within the district or any branch outside the district, it shall obtain the prior permission of the Regional Director and an intimation is to be given to the Registrar about opening of every branch within thirty days of such opening.
(3) Nidhi 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.
(4) Nidhi shall not open branches or collection centres or offices or deposit centres, or by whatever name called unless financial statement and annual return (up to date) are filed with the Registrar.
(5) A Nidhi shall not close any branch unless it –
(a) publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least thirty days prior to such closure, informing the public about such closure;
(b) fixes a copy of such advertisement or a notice informing such closure of the branch on the notice Board of Nidhi for a period of at least thirty days from the date on which advertisement was published under clause (a) ; and
(c) gives an intimation to the Registrar within thirty days of such closure.
Acceptance of Deposits (Rule 13 of the Nidhi Rules, 2014)
Rule 13 of the Nidhi Rules, 2014 provides that any of the fixed deposits accepted by a Nidhi company shall be for a minimum period of six months and a maximum period of sixty months.
Recurring deposits shall be accepted for a minimum period of twelve months and a maximum period of sixty months.
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.
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 and the rate of interest shall not exceed two per cent above the rate of interest payable on savings bank account by nationalised banks.
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 Non-Banking Financial Companies can pay on their public deposits.
A fixed deposit account or a recurring deposit account shall be foreclosed by the depositor subject to the following conditions, namely:–
(a) Nidhi shall not repay any deposit within a period of three months from the date of its acceptance;
(b) where at the request of the depositor, a Nidhi repays any deposit after a period of three months, the depositor shall not be entitled to any interest up to six months from the date of deposit;
(c) where at the request of the depositor, a Nidhi makes repayment of a deposit before the expiry of the period for which such deposit was accepted by Nidhi, the rate of interest payable by Nidhi on such deposit shall be reduced by two per cent from the rate which Nidhi would have ordinarily paid, had the deposit been accepted for the period for which such deposit had run.
It may be noted that in the event of death of a depositor, the deposit may be repaid prematurely to the surviving depositor or depositors in the case of joint holding with survivor clause, or to the nominee or to legal heir 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.
Un-encumbered term deposits by Nidhi (Rule 14 of the Nidhi Rules, 2014)
Under Rule 14 of the Nidhi Rules, 2014, every Nidhi shall invest and continue to keep invested, in unencumbered term deposits with a Scheduled commercial bank (other than a co-operative bank or a regional rural bank), or post office deposits in its own name an amount which shall not be less than ten per cent of the deposits outstanding at the close of business on the last working day of the second preceding month.
In cases of unforeseen commitments, temporary withdrawal may be permitted with the prior approval of the Regional Director for the purpose of repayment to depositors, subject to such conditions and time limit which may be specified by the Regional Director to ensure restoration of the prescribed limit of ten per cent.
Loans by Nidhi
According to Rule 15A Nidhi shall provide loans only to its members. The loans given by a Nidhi to a member shall be subject to the following limits, namely:–
(a) two lakh rupees, where the total amount of deposits of such Nidhi from its members is less than two crore rupees;
(b) seven lakh fifty thousand rupees, where the total amount of deposits of such Nidhi from its members is more than two crore rupees but less than twenty crore rupees;
(c) twelve lakh rupees, where the total amount of deposits of such Nidhi from its members is more than twenty crore rupees but less than fifty crore rupees; and
(d) fifteen lakh rupees, where the total amount of deposits of such Nidhi from its members is more than fifty crore rupees: Where a Nidhi has not made profits continuously in the three preceding financial years, it shall not make any fresh loans exceeding fifty per cent of the maximum amounts of loans specified in clauses (a), (b), (c) or (d).
A member shall not be eligible for any further loan if he has borrowed any earlier loan from the Nidhi and has defaulted in repayment of such loan.
The amount of deposits shall be calculated on the basis of the last audited annual financial statements.
A Nidhi shall give loans to its members only against the following securities, namely:–
(a) gold, silver and jewellery, and the re-payment period of such loan shall not exceed one year.
(b) immovable property and, the total loans against immovable property [excluding mortgage loans granted on the security of property by registered mortgage, being a registered mortgage under section 69 of the Transfer of Property Act, 1882 (IV of 1882)] shall not exceed fifty per cent of the overall loan outstanding on the date of approval by the Board, the individual loan shall not exceed fifty per cent of the value of property offered as security and the period of repayment of such loan shall not exceed seven years.
(c) fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies. It may be noted that such securities duly discharged shall be pledged with Nidhi and the maturity date of such securities shall not fall beyond the loan period or one year whichever is earlier and in the case of loan against fixed deposits, the period of loan shall not exceed the unexpired period of the fixed deposits.
Rate of interest on any loan given by a Nidhi
The rate of interest to be charged on any loan given by a Nidhi shall not exceed seven and half per cent above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method.
Nidhi shall charge the same rate of interest on the borrowers in respect of the same class of loans and the rates of interest of all classes of loans shall be prominently displayed on the notice Board at the registered office and each branch office of Nidhi.
Directors in a Nidhi company
The Director shall be a member of Nidhi.
The Director of a Nidhi shall hold office for a term up to ten consecutive years on the Board of Nidhi.
The Director shall be eligible for re-appointment only after the expiration of two years
of ceasing to be a Director.
Where the tenure of any Director in any case had already been extended by the Central Government, it shall terminate on expiry of such extended tenure.
The person to be appointed as a Director shall comply with the requirements of Director Identification Number.
A person shall not be eligible for appointment as a director of a Nidhi, if –
(a) he is of unsound mind and stands so declared by a competent court;
(b) he is an undischarged insolvent;
(c) he has applied to be adjudicated as an insolvent and his application is pending;
(d) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence.
Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company;
(e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;
(f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;
(g) he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or
(h) he has been allotted a Director Identification Number under section 154 of the Act.
No person who is or has been a director of a Nidhi or any other company which:
(i) has not filed financial statements or annual returns for any continuous period of three financial years; or
(ii) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.
Dividend
Under Rule 18 of the Nidhi Rules, 2014 a Nidhi shall not declare dividend exceeding twenty five per cent or such higher amount as may be specifically approved by the Regional Director for reasons to be recorded in writing and further subject to the following conditions, namely:–
(a) an equal amount is transferred to General Reserve;
(b) there has been no default in repayment of matured deposits and interest; and
(c) it has complied with all the rules as applicable to Nidhis.
Appointment of Auditor
Nidhi shall not appoint or re-appoint an individual as auditor for more than one term of five consecutive years and Nidhi shall not appoint or re-appoint an audit firm as auditor for more than two terms of five consecutive years.
It may be noted that an auditor (whether an individual or an audit firm) shall be eligible for subsequent appointment after the expiration of two years from the completion of his or its term.
Further, in case of an auditor (whether an individual or audit firm), the period for which he or it has been holding office as auditor prior to the commencement of these rules shall be taken into account in calculating the period of five consecutive years or ten consecutive years, as the case may be.
Auditor’s certificate
The Auditor of the company shall furnish a certificate every year to the effect that the company has complied with all the provisions contained in the rules and such certificate shall be annexed to the audit report and in case of non-compliance, he shall specifically state the rules which have not been complied with.
Filing of half yearly return
As per Rule 21 of the Nidhi Rules, 2014, every Nidhi company required to file half yearly return with the Registrar in Form NDH-3 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within thirty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice or Cost Accountant in practice.
Power of Registrar to enforce compliance
As per Rule 23 of the Nidhi Rules, 2014, the Registrar of companies may call for such information or returns from Nidhi as he deems necessary and may engage the services of chartered accountants, company secretaries in practice, cost accountants, or any firm thereof from time to time for assisting him in the discharge of his duties.
Further, in respect of any Nidhi which has violated these rules or has failed to function in terms of the Memorandum and articles of Association, the concerned central government may appoint a Special Officer to take over the management of Nidhi and such Special Officer shall function as per the guidelines given by Central government:
It should also be noted that an opportunity of being heard shall be given to the concerned Nidhi by the Central Government before appointing any Special Officer.
Certain provisions of RBI Act not applied to Notified NBFCs
Reserve Bank of India issued Master Circular dated 1st July, 2014, pertaining to exemptions from the provisions of RBI Act, 1934 provides that the provisions of Sections 45-IA [Requirement of Registration and net owned fund], 45-IB [Maintenance of Liquid Assets] and 45-IC [Creation of Reserve Fund] of the Reserve Bank of India Act, 1934 shall not apply to any non-banking financial company Notified under Section 620A of the Companies Act, 1956, or under section 406 of the Companies Act, 2013 known as Nidhi Companies; and the provisions contained in Non- Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 shall not apply to a Mutual Benefit Financial company or a Mutual Benefit company provided that the application of Mutual Benefit company is not rejected by Government of India under the provisions of the Companies Act, 1956.
The Central Government has been empowered under section 462 (1), to issue in public interest, by notification, directing that any of the provisions of Companies Act, 2013 shall not apply to such class or classes of companies or shall apply to the class or classes of companies with such exceptions, modifications and adaptations as may be specified in the notification.
In this context the Central Government vide notification no. 465(E) dated 5th June, 2015 directed that respective sections of the Companies Act, 2013 shall not apply or shall apply with certain exceptions, modification and adaptations to Nidhi companies.
A Guide to Understanding the Role of a Nidhi company in India
A Nidhi company is a type of non-banking financial institution in India which is regulated by the Ministry of Corporate Affairs.
It is a savings and loan-based organization that is specifically designed to serve the needs of its members.
Nidhi companies are recognized under Section 406 of the Companies Act, 2013, and are closely monitored by the Reserve Bank of India (RBI).
The primary purpose of a Nidhi company is to provide financial services to its members. These services include accepting deposits, granting loans, and providing other services such as mutual funds and insurance.
The main objective of these companies is to promote savings and to provide financial assistance to its members in a transparent and well-regulated environment.
Nidhi companies are required to comply with certain regulations issued by the RBI in order to maintain their status.
These regulations include maintaining a minimum capital requirement, having a minimum number of members, not accepting deposits from non-members, and investing their funds only in approved securities.
Additionally, they are required to deposit a certain amount of their funds with the RBI as security against any potential losses due to default.
Nidhi companies offer a number of benefits to their members. These include competitive interest rates on deposits, flexible repayment options, and a wide range of loan products. Additionally, these companies are committed to providing high-quality services and customer satisfaction. They are also known for their commitment to corporate governance and ethical practices.
In conclusion, Nidhi companies are a great option for individuals who are looking for reliable and transparent financial services. They are closely regulated by the RBI and offer a number of benefits to their members. With their commitment to providing a high-quality service, they are sure to be a great choice for anyone who is looking for a reliable and trustworthy financial institution.
Examining the Various Types of Nidhi Companies in India
Nidhi companies in India are a type of non-banking finance companies (NBFCs) that are registered under the Companies Act 2013 and are regulated by the Reserve Bank of India (RBI).
These companies are engaged in the business of accepting deposits from their members and lending money to them for their benefit. They are also known as Permanent Fund, Benefit Funds, or Mutual Benefit Funds.
Nidhi companies are classified into three types: small, medium, and large.
Small Nidhi companies are those with a net owned fund (NOF) of up to Rs. 2 crore.
Medium Nidhi companies are those with a net owned fund between Rs. 2 crore and Rs. 20 crore.
Large Nidhi companies are those with a net owned fund of more than Rs. 20 crore.
Nidhi companies provide a range of services to their members, including deposits, loans, and other financial services, such as mutual funds and insurance. They are also involved in the promotion of thrift and savings among their members by providing them with attractive interest rates on their deposits.
Nidhi companies also have to abide by certain rules and regulations laid down by the RBI in order to ensure the safety of their members’ deposits. These include a minimum capital requirement, a limit on the amount of funds they can lend out, and certain restrictions on their lending activities.
The RBI also requires Nidhi companies to submit regular returns and reports to it in order to ensure compliance with its regulations. Additionally, Nidhi companies must maintain a separate account for their members’ deposits and must adhere to a number of other regulations, such as not investing in speculative activities.
Nidhi companies play an important role in the Indian financial system by providing small savers with an avenue to save their money and earn interest on it.
They also help to promote financial inclusion in the country by providing financial services to those who may not have access to the formal banking system.
Analyzing the Impact of Nidhi Companies on the Indian Banking Sector
The Nidhi Companies have had a major impact on the Indian banking sector.
A Nidhi company is a type of non-banking financial company (NBFC) that is incorporated with the purpose of cultivating the habit of thrift and savings amongst its members.
It is regulated by the Ministry of Corporate Affairs and the Reserve Bank of India (RBI).
In recent years, the number of Nidhi companies in India has grown significantly. As of 2020, there were over 7,000 registered Nidhi companies in the country, with a total deposit base of over Rs. 11,000 crore.
These companies mainly offer deposit and lending services to their members, who are typically small investors who are looking for an alternative to traditional banking services.
The presence of Nidhi companies has had a positive effect on the Indian banking sector. The companies have provided an additional source of finance for small investors, who are often underserved by traditional banking services. This has allowed more people to access financial services, which has in turn helped to promote greater financial inclusion in the country.
Furthermore, the presence of Nidhi companies has also helped to reduce the banking sector’s dependence on traditional sources of finance, such as deposits and loans from other financial institutions. This has resulted in increased competition in the banking sector, which has led to lower interest rates and improved customer service.
Finally, Nidhi companies have also helped to reduce the cost of providing banking services. Since these companies are not subject to the same regulations as banks, they can offer services at much lower rates than traditional banks. This has allowed customers to access financial services at a lower cost, which has had a positive impact on the banking sector overall.
Overall, the impact of Nidhi companies on the Indian banking sector has been positive. These companies have helped to increase financial inclusion, reduce the banking sector’s dependence on traditional sources of finance, and lower the cost of providing banking services. As a result, the banking sector has been able to grow and evolve to meet the needs of its customers.
The Growing Popularity of Nidhi Companies in India: A Review
The emergence of Nidhi companies in India has been an important development in the country’s financial sector. Over the years, these companies have seen a steady rise in popularity due to their unique offerings.
This article aims to provide an overview of the growing popularity of Nidhi companies and analyze the factors that have contributed to their success. Nidhi companies, also known as Permanent Fund or Benefit Funds, are mutual benefit societies registered under the Companies Act.
They are non-banking financial companies that primarily offer deposit and loan services to members. They are registered and regulated by the Ministry of Corporate Affairs and are subject to the Reserve Bank of India’s prudential regulations.
The main attraction of Nidhi companies is their ability to provide competitive interest rates on deposits and loans. These companies typically offer higher returns than traditional banks and other financial institutions, making them a popular choice for investors looking for higher returns.
Additionally, Nidhi companies are also known for their low loan processing fees and quick loan approvals, which are attractive to borrowers. In recent years, the popularity of Nidhi companies has grown significantly, with the number of companies increasing from around 700 in 2013 to over 3,500.
This growth can be attributed to a number of factors, including the government’s efforts to promote the sector, the increasing demand for financial services among individuals and businesses, and the availability of technology-driven solutions to facilitate the delivery of services.
Furthermore, the government has taken several steps to promote the growth of Nidhi companies. These include the introduction of new regulations to strengthen corporate governance and the establishment of the Nidhi Bank, which provides access to banking services for Nidhi companies.
Additionally, the government has also provided tax incentives to Nidhi companies in order to encourage them to expand their operations. In conclusion, the growing popularity of Nidhi companies in India is a reflection of their unique offerings and the government’s efforts to promote the sector.
With their competitive interest rates, low processing fees and quick loan approvals, Nidhi companies have become an attractive option for both investors and borrowers.
Going forward, the sector is expected to continue to grow as the government takes further steps to promote it. Nidhi companies are an important part of the Indian financial landscape.
They are an important source of credit for the unbanked population, providing access to low-interest loans, savings and other financial services.
Nidhis have been instrumental in helping people access banking services, which are a necessity for a healthy financial market.
With the increasing popularity of digital banking, Nidhis can further expand their reach and help bridge the digital divide in India.