What is a Nidhi Company?
Section 406 of the Companies Act, 2013 registers a Nidhi Company. The mutual benefit society accepts deposits and lends money to members. A Nidhi Company promotes savings and provides members with affordable financial support.
Key Features of a Nidhi Company:
-
No External Funding: Unable to borrow from or lend to the general public.
-
Simple Operations: Focus on providing loans against securities like gold, property, and fixed deposits.
- Low-Cost Financial Services: Minimal interest rates compared to traditional banks.
Purpose and Nature of Nidhi Companies
The primary purpose of a Nidhi Company is to provide financial assistance to its members while encouraging the habit of saving. Here's a deeper look into their nature:
-
Member-Based Operations: Only the company's members can deposit, borrow, or participate in such activities.
-
Low-Cost Financial Services: Nidhi companies do not offer financial services at cost, as banks do; it is at minimal cost.
- Not-for-Profit Objectives: Nidhi Companies are not registered as charitable organizations, but their members benefit from them.
Get Expert CA Consultation Online
Resolve your tax queries and compliance issues with our certified Chartered Accountants.
Book Consultation NowBenefits of Nidhi Company
- A simple registration process with fewer complexities compared to other NBFCs.
- Encourages regular savings among members, aiding in financial discipline.
- Limited Liability: Members' liability is limited to their capital contribution.
- Lower Interest Rates: Members can borrow at reasonable interest rates.
- No RBI Regulations: Simplified compliance as the RBI does not directly regulate them.
- Mutual Benefit: Operations designed to benefit members, ensuring fairness and trust.
Consult with a Lawyer Online
Get legal advice from experienced lawyers to handle your cases efficiently.
Book Lawyer ConsultationRestrictions on Nidhi Companies
- No External Borrowing: Unable to borrow funds from non-members.
- No Public Advertisements: Prohibited from promoting deposit schemes to the general public.
- Limited Business Scope: Can only deal with members for deposits and loans.
- No Speculative Investments: Cannot invest in stocks, chit funds, or speculative assets.
Differences Between Nidhi Company and Bank
Feature | Nidhi Company | Bank |
---|---|---|
Purpose | Mutual benefit for members | Financial services for all |
Regulatory Authority | Ministry of Corporate Affairs | Reserve Bank of India |
Membership Requirement | Mandatory | Not required |
Scope of Operations | Limited to members | Open to the public |
Profit Motive | Member welfare | Profit-oriented |
Documents Needed for Nidhi Company Registration
- PAN card and identity proof for all directors and members.
- Recent utility bills or rental agreement for address proof.
- Property ownership documents or NOC for registered office proof.
- Director Identification Number (DIN) for all directors.
- Digital Signature Certificate (DSC) for signing documents.
- MOA and AOA for defining objectives and regulations.
Step-by-Step Procedures for Nidhi Company Registration
- Obtain Digital Signature Certificate (DSC).
- Get Director Identification Number (DIN).
- Reserve a unique company name using the MCA portal.
- Draft MOA and AOA.
- File incorporation forms through the MCA portal.
- Receive Certificate of Incorporation (COI).
- File NDH-1 and NDH-2 forms for compliance.
- Open a corporate bank account to begin operations.
FAQs
-
How does Nidhi Company earn money?
They make money by collecting interest on loans given to their members.
-
What is the major objective of a Nidhi Company?
Its aim is to involve savings and provide financial assistance to its members.
-
Is Nidhi Company safe?
Yes, it is safe when registered under the MCA and compliant with Nidhi Rules, 2014.