A Nidhi company is classified as a Non-banking Financing Company (NBFC) and can be registered under section 406 of the Companies Act, 2013. The main business is to facilitate lending money between the core members or shareholders of the company. It encourages members to save and invest money within the company. The deposits are used by the company for its members to provide loans, to acquire government-issued stocks/bonds/debentures/securities. MCA regulates such companies, and the RBI does financial monitoring.

Benefits of a Nidhi Company

As a member, one can borrow money at a lower rate compared to the banks. It is advantageous in times of need since different persons will need funds at various points in time.

It encourages all its members to save money and encourages a more economical lifestyle. Also, borrowing and lending to known persons with a fixed procedure are less cumbersome than banks or any other informal mode. It enables members to unlock the potential of their money and gain from lower interest rates when required.

Nidhi Company registration process

To form a Nidhi company, a minimum of seven members are mandatory, with three designated as the directors. It should obtain membership of a minimum of 200 members within a year of commencement.

The company should have a minimum equity share capital of Rs Five lakhs as paid up, for registering as a Nidhi Company, and the Net Owned Funds (NOF) should be increased to Rs Ten lakhs within a year of registration. Also, a minimum of 10% of its outstanding deposits should be term deposits and NOF to deposits ratio should be 1:20. This includes equity share capital and free reserves but excludes losses accumulated and intangible assets.

A Nidhi company cannot transact in the chit fund business, hire purchase finance, acquisition or insurance of securities issued by corporate, engaging as an NBFC in the business of advances or loans, leasing finance, acquisition of stocks, shares, bonds, securities, and debentures issued by any local authority or government securities.

The registration process involves Name Reservation with MCA, DSC, and DINs and the documentation process and approval from the RBI.

Documents Required to be submitted by all Directors for Nidhi Company Registration are a self-attested copy of PAN card, copy of Driver’s License or Voter ID or Aadhaar Card or Passport, copy of Bank Statement or Telephone Bill or Electricity Bill, Passport-size Photograph and Specimen Signature Certificate.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.