Nidhi Company Registration: Applicability, Requirements & Procedure
‘Nidhi’ literally translates to ‘wealth’ in Hindi. In the area of non-banking finance, the definition of the word is not much different. Nidhi Companies are organisations in which a group of individuals pool their finances to establish one enormous corpus fund for the express purpose of giving financial help to the company’s members in the form of loans.
These loans are made available at acceptable interest rates that are often lower than market rates. These loans are mostly used for personal reasons. These are often secured loans backed by collateral assets.
Permanent Funds, Benefit Funds, Quasi Bank, Mutual Benefit Funds, and Mutual Benefit Company are other names for Nidhi businesses.
Since most of the funds come from the members, deposits thus raised by a Nidhi company are not much as compared to the organized banking sector.
This sort of organisation is fairly common, particularly in the southern portion of the country, and is regarded as a localised single office institution. They are mutual benefit societies since their transactions are limited to its members and membership is limited.
Because Nidhis are classified as NBFCs, the RBI has the authority to give directives to them about their deposit acceptance operations.
However, because Nidhis exclusively interact with their shareholder-members, the RBI has exempted such notified entities from the basic rules of the RBI Act and other NBFC-specific directives. As of February 2013, the RBI has no specific regulatory framework for Nidhis.
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Nidhi Company’s Requirements
• A Nidhi company that must be established under this Act must be a public company;
• It must have a minimum paid up equity share capital of Rs.5,00,000/-; and
• No preference shares would be issued. If such shares were already issued by a Nidhi Company prior to the commencement of this Act, such preference shares are to be redeemed in accordance with the terms of issue of such shares;
• The goal of such a firm would be to instil in its members a habit of thrift and saving, and the services would be limited to its members;