EnglishNidhi Company is a type of Non-Banking Financial Company (NBFC). It is formed to borrow and lend money to its members. It inculcates the habit of saving among its members and works on the principle of mutual benefit. These companies typically operate in the southern part of the country. Nidhi Company isn’t required to receive a license from the Reserve Bank of India (RBI), hence it is easy to form. It is registered as a public company and should have “Nidhi Limited” as the last word of its name.
The Advantages of Nidhi Limited Company are given below:-
Simple Formation of Nidhi Company
- The formation of the Nidhi Company is a very easy process.
- It requires only 7 members out of which 3 members would be the directors.
- Nidhi Company does not require to obtain a licence from RBI.
- The Nidhi company takes hardly 10-5 days to get registered.
- Also, no. of documents required for registration is significantly less.
Capital required for registration
- The capital requirement for the registration of Nidhi company is very less compared to other types of finance companies.
- The minimum capital requirement for the registration of Nidhi company is 5,00,000 Rs. only
- Where there lies an opportunity to invest the capital within two months after the registration also by paying the registration fees of Rs. 19,999 Rs.
Limited RBI Regulations
- Nidhi Company though it is a finance company and falls under the category of NBFC, does not require the approval of RBI.
- Nidhi Companies are exempted from main provisions otherwise applicable to an NBFC in India.
- These companies follow Nidhi rules 2014 issued by the centre in respect of the activity and working of the company.
- There would be the least intervention of RBI
No outsider intervention
- The Nidhi Companies are formed, managed and provide benefits only to their members.
- The outsider will not be allowed to intervene in Nidhi in any way. Be it working with the Nidhi companies or depositing money with them or even availing credit from Nidhi.
- There would be no external intervention in the management as well.
Benefits to the members
- Nidhi Company works to increase the savings of its members.
- It is straightforward to make donations and get loans from the company for its members
- The loans given to the members at a lower rate compared to the market rate hence it attracts the members to do more savings.
- The net owned fund ratio of Nidhi Company is 1:20. That means you invest 1 rupee and you will get a deposit of 20 rupees
- The investments in the Nihi Company are secured ones. The risk of non payment of loans is less as compared to other finance businesses.
Exemptions and privileges under the Companies Act,2013
- Accordingly certain provisions of the Companies Act,2013 shall not apply to the Nidhi Company and Nidhi would be exempted from certain provisions of the same.
- Service of documents to Nidhi members may be done by sending them to him by post or registered post or by speed post or by courier or by delivering the same at his office or by such electronic or other modes as may be prescribed.
- A Nidhi Company is free to make a private placement to any number of persons and it shall not be deemed to be an offer to the public.
Limited Fund Raising
The Nidhi company accepts deposits members-only hence the funds of the Nidhi company are very limited as compared to other finance companies.
Limited credit availability
As the funds raised are limited the availability of the credit will also be defined as compared to the other finance companies.
RBI vigilance
Though the Nidhi Companies are free from the strict compliance of the RBI regulations, their deposit acceptance operations are governed by the RIB
Other Regulations
The central government issues rules and directions governing Nidhi Companies from time to time. Therefore, they are not totally exempt from the regulatory framework.
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