Simplifiled

Introduction to Nidhi Companies

Nidhi Companies belong to the Non-banking financial companies structure. Registering a Nidhi Company allows a Nidhi to borrow from its members and lend to the members. Nidhi Companies are created to cultivate the habit of thrift and savings among its members. The funds that are contributed to a Nidhi Company are only from its members. For Incorporating a Nidhi Company, no license is required from the Reserve Bank of India. Hence, the formation of the Nidhi Company is easy. Nidhi Companies are registered as Public Companies and should have Nidhi Limited at the last of the name. It should also be noted that the Nidhi Companies fall under the purview of the Reserve Bank of India as the functioning of Nidhi Companies is similar to NBFCs.

Features of Nidhi Company

Borrowing & Lending to its members: Nidhi Company cannot lend & borrow from outside its member community.
“Nidhi ltd.”: “Nidhi limited” must be added to name of the company incorporation if it is registered as a Nidhi company under companies act, 2013.
Share capital: Minimum equity share capital of INR 5 lakh is required for company incorporation as Nidhi Company.
No. of members: At least 7 members must be there to start a Nidhi company. Out of these 7 members, 3 must be the full-time directors of the company.

Advantages of Nidhi Company

Nidhi rules, 2014: According to the Nidhi rules as designed for the functioning of a Nidhi company, they are not allowed to deal with the funds of any person other than their members and the powers to impose certain restriction by RBI are limited.
Ease of formation: Unlike other NBFCs or scheduled banks, Nidhi Company does not have to obtain a license from RBI.
Channelizing savings: Nidhi Company gives an opportunity to all its members to start the borrowing and lending process once they become a member of it.
Low credit rate: Lower rate of interest on loan which is offered to the members of the Nidhi Company than prevailing market rate.
Minimal outside intervention: Since Nidhi company offers the borrowing and lending facility for its members only, outsider intervention is automatically reduced.
Cost effective: Nidhi Company registration is a cost-effective affair compared to other financial institutions.

Disadvantages of Nidhi Company

Limited Fund Raising: Fundraising in a Nidhi Company is directly related to the number of members it has.
Limited credit availability: Limited fund with the company raises the concern of limited credit availability.
RBI vigilance: Although there are no strict compliances imposed upon the Nidhi company by RBI, their activities are governed by the Reserve Bank.
Other Regulations: The central government issues rules and directions governing Nidhi Companies from time to time.

Procedure for Nidhi Company Registration

Applying for DIN and DSC: Directors of the Nidhi company apply for DIN (Director’s Identification Number) and DSC (Digital Signature Certificate).
Name Approval: Choose and suggest 3 different names to the MCA for your Nidhi Company. One will be accepted by the MCA.
MoA & AoA: File Memorandum of Association and Articles of Association to the ROC (Registrar of Companies) with the subscription statement.
Certificate of Incorporation (CIN): Receive the incorporation certificate from ROC.
PAN, TAN and Bank Account: Apply for PAN and TAN and open a bank account.

General Requirements To Incorporate A Nidhi Company

Minimum Capital Requirement Is Rs/- 5,00,000 Only.
Minimum Number Of Members Required Is 7 Out Of Which 3 Can Be The Directors.
Any Public Company Can Make Application In Form Ndh-4 Along With Fees To Get The Status Of A Public Company.
A Nidhi Company Incorporated On Or After Commencement Of Nidhi Rules 2014, Shall File Form Ndh-4 Within 60 Days From Expiry Of One Year From Its Incorporation Date.
Every Nidhi Company Shall Have Last Word “Nidhi Limited” In Its Name.
Requirements After Its Incorporation: Minimum Number Of Members Should Be 200.

FAQs On Nidhi Companies

Can Nidhi Company take deposits from a non-member?
No, all the financial transactions have to be made only between the shareholders of the company.
How do I choose the name of Nidhi Company?
Ensure that the name is unique, not similar to any other registered company, and ends with "Nidhi Limited".
Are all the address proof documents necessary for Nidhi company registration?
No, any one of the address proof documents is sufficient.
Who can get Nidhi Company registration?
The Nidhi company must be registered as a Public Limited Company under the Companies Act, 2013.