Nidhi is a safe and economical way to collect funds from the general public. It is also known as Mutual Benefit Company or Benefit Funds or Mutual Benefit Funds or Permanent Funds. The safe and economical way to raise funds from the general public is through Nidhi. It refers to any mutual benefit society reported as a Nidhi Company by the Central / Union Government in the Indian financial sector. These are mainly established among its members to cultivate the habit of thrift and savings. Nidhi's are more common in South India and are highly localised single office institutions. They are societies of mutual benefit since their transactions are limited only to the members, and individuals are limited to members. The donation from the members is the principal source of funds. The loans are provided to the members for purposes such as house building or repairs at reasonably fair rates and are usually secured. Compared to the organized banking sector, the deposits mobilized by Nidhi's are not very large. Section 620A of Companies Act, 1956 applies to Nidhi Companies. In India, anyone can register a Nidhi Company; as there are less enforcement and legal formality to be taken care of. Five Lakhs is the minimum capital requirement and there have to be at least seven members to incorporate a Nidhi Company. Other requirements are given under section 406 of Companies Act. These are that Nidhi company will be a public company, it cannot issue preference shares, If prior to the commencement of this Act, preference shares were already issued by Nidhi Corporation, those preference shares shall be redeemed in accordance with the conditions of the issuance of such shares and as part of its name, it will have the words' Nidhi Limited. There are also requirements to be fulfilled after incorporation, these are, Net owned funds shall be Rupees 10 lakhs or more ('Net owned funds' means the aggregate of paid-up equity capital and free reserved assets as decreased by the accumulated and intangible assets shown in the last audited balance sheet), and the ratio of net owned funds to deposit shall not exceed 1:20. The minimum number of participants should be 200 and lastly, unencumbered term deposits in the sum of not less than 10% of the outstanding deposits referred to in Rule 14. The regulatory framework for Nidhi Companies is such that they are governed by the 2014 Nidhi Rules. They are incorporated as a Public Limited company and hence, as per the Companies Act, 2013 and Nidhi rules, 2014, they must comply with two sets of rules relating to the Public Limited Company. In order to register a company, there is no need to seek RBI approval as RBI explicitly exempted this category of NBFC in India.

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.