Rules & Regulations of Nidhi Company Registration

A Nidhi Company is a type of Non- Banking Financial Corporation (NBFC), which is incorporated under Section 56 of Companies Act, 2013. Since, the company is incorporated only for the mutual benefits of its members or shareholders, the main objective of the company is to promote the habit of savings amongst the members, so that they can with ease, face the financial needs when it arises. The companies which are engaged in the practice of doing Nidhi business of borrowing and lending from its members to members only are also known by the names of Benefit Funds, Mutual Benefit Funds, Permanent Funds and Mutual Benefit Company. We will discuss the rules & Regulations of Nidhi Company Registration.

The main source of funds in the Nidhi Company is from its members or shareholders. Every Nidhi Company is governed by the Ministry of Corporate Affairs, and all its financial activities are regulated by the Reserve Bank of India (RBI). The Nidhi Company has been predominant in the Southern most parts of India, and there is a need to incorporate them on a wider scale in India.

Things to know about Nidhi Company Registration

Things that must be considered while Nidhi Company Registration are as follows-

• Nidhi Company is incorporated as Public Ltd. Company with at least 7 Members 3 Directors and a minimum capital of INR 10 Lakh;
• Nidhi Company is not allowed to issue preference shares during;
• The Company must use "Nidhi Limited" as its suffix forming part of its name;
• A Nidhi Company should have net owned funds of INR 10 lakh or more;
• Nidhi Company should have unfettered deposits of not less than ten percent of the outstanding deposits;
• The ratio of NOF to deposits must not exceed the 1:20.

What all is allowed to a Nidhi Company?

After Nidhi Company Registration, the company is not allowed to give unsecured loans to its members and is not permitted to do Micro Finance Business and therefore is only allowed to give secured loans to only its members.

Nidhi Companies can advance loan only for the following securities:-

Gold Loan

It is one of the main streams of trade and is very well-liked for Nidhi Companies subject to various rules and Regulations applicable under the Nidhi Rules of 2014. Below mentioned are the conditions:

• The maximum finance against the gold must be up to 80%.
• The maximum repayment period must be 12 months.
• The interest rate should not exceed 7.5% plus the maximum interest rate on gold loan.
• A maximum amount of loan of INR 2, 00,000 can be given by Nidhi Company if deposits do not exceed INR 2 Crores.

Loan against immovable Property

Despite the fact that it is not well liked for Nidhi Companies and has certain state of affairs. Nevertheless, an option is given through which Nidhi Company can pay their loans to people who does not have the gold:-

• The maximum loan can be INR 2 lakhs if deposits do not exceed INR 2 Crores.
• The maximum finance can be up to 50%.
• The repayment period of loan should not exceed 60 months.
• Furthermore, loan against immovable property cannot exceed 50% of the total loan amount.

Loan against NSC/Government Bonds

Althoughloan against NSC is not as much as famous like others and is rarely used.

Vehicle Finance

Nidhi companies are not allowed to give this type of loan. Only Non-Banking Financial Companies (NBFCs) are allowed to give Vehicle finance in India.

What are the Nidhi Company Rules?

The Rules to comply for Nidhi Company Registration are as follows-

• The Nidhi Companies are governed by less stringent provisions which makes their registration process easier and faster. Since, such companies are the mutual benefits society which provides benefits to its members or shareholders only but there are certain requirements which are necessary to establish a Nidhi Company:
• A Nidhi Company should not be involved in any other business other than that of borrowing and lending.
• A company should not lend money or accept deposits from the persons who are not the members or shareholders of a company.
• A company should not issue any preference shares, debentures or any kind of debt instrument.
• A Nidhi Company should not change the management of the company unless directed by the Regional Director.
• A Nidhi Company should not acquire any other business by the purchase of shares or control of the board of directors of the other company.
• A Nidhi Company should not be engaged in the business of Chit Fund, Hire Purchase Finance, Leasing Finance or Acquisition of Securities issued by any corporate.
• A company should not pay any brokerage or incentives or engage into any illegal activities for favoring deposits.
• Further, a Nidhi Company should not admit a minor, trust or body corporate as the member or shareholders. Also, by the end of one year the company needs to have at least 200 members.

Conclusion

A Nidhi Company is a type of Non- Banking Financial Corporation (NBFC), which is registered under Section 56 of Companies Act, 2013. Nidhi Company Registration is done only for the mutual benefits of its members or shareholders, the main objective of the company is to promote the habit of savings amongst the members, so that they can with ease, face the financial needs when it arises.

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