Nidhi finance companies are non-banking financial institutions that operate primarily in India. They are regulated by the Ministry of Corporate Affairs and are categorized as mutual benefit societies. The primary objective of Nidhi companies is to encourage savings among its members and provide them with access to credit at reasonable interest rates.
Nidhi companies can only accept deposits and offer loans to their members and cannot engage in any other business activities. They are required to maintain a minimum net owned fund (NOF) and adhere to strict regulatory guidelines to ensure the safety of the deposits and interests of the members.
Requirement of Nidhi Company Registration
- Minimum number of members: To register a Nidhi Company, it must have a minimum of seven members.
- Incorporation: The company must be registered as a public limited company under the Companies Act, 2013.
- Minimum capital requirement: The minimum paid-up capital required for a Nidhi Company is Rs. 5 lakh.
- Name availability: The proposed name of the company must be unique and not similar to any existing company or trademark.
- Object clause: The object clause of the company must include the acceptance of deposits and lending to its members.
- Management and control: The company must have a board of directors consisting of at least three directors, and the majority of them must be individuals.
- Branches: A Nidhi Company can only have branches within the district where it is registered.
- Compliance: The company must comply with the rules and regulations laid down by the Ministry of Corporate Affairs and the Reserve Bank of India.
- Nidhi Company Software: Nidhi Company Software is required for proper management of the company, to maintain all transactions, account management, deposit and loan management, and other financial activities.
Basic Importance of Nidhi Company
The importance of Nidhi Limited Company lies in its ability to provide financial assistance to its members at lower rates of interest than traditional banks. It allows members to borrow money from the company, and in turn, invest their savings in the company. This creates a symbiotic relationship between the members and the company, where both parties benefit.
Another advantage of a Nidhi Limited Company is that it is easy to set up and manage. It requires a minimum of 7 members to form the company, and the registration process is straightforward. Once registered, the company is subject to less stringent regulations than traditional banks, which makes it easier to operate.
Some of the key features of Nidhi Finance Companies include the following:
- They accept deposits from their members and provide loans and advances to them.
2. They are required to have a minimum of 200 members, and net owned funds of at least Rs. 10 lakh.
3. They cannot issue preference shares, debentures or any other debt instrument, and are not allowed to deal in any form of chit fund activities.
4. They are not allowed to carry on any business other than that of a Nidhi company.
5. They are required to maintain certain ratios, such as the Net Owned Funds to Deposits Ratio (NOFDR) and the Net Owned Funds to Risk Weighted Assets Ratio (NORWAR).
Overall, Nidhi Limited Company lies in its ability to provide affordable financial services to its members and promote the habit of thrift and savings. It provides an alternative to traditional banks, which may not be accessible or affordable to everyone, particularly those from lower-income backgrounds.
