Nidhi Company Registration
Nidhi Company Registration
Ideal for lending and borrowing amongst members
Starting At Rs. 19,999 Onwards
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(Takes 30-40 days)
Nidhi Company Registration
About Nidhi Company
The feature that differentiates Nidhi Company from other companies/NBFCs etc. is that Nidhi deals with deposits from and loans to its members (shareholders) only, and works for the mutual benefits of its members. Accordingly, certain exemptions have been provided to these companies in respect of annual compliances and taxation.
Nidhi Companies in India are formed, governed, and regulated by Section 406 of the new Indian Companies Act of 2013, the Companies (Nidhi Companies) Rules of 2014, and the Chapter XXVI of the Companies Rules, 2014.
The objective of incorporating a Nidhi Company is to encourage savings as well as frugality amongst its members. To fulfill this objective of cultivating the habit of saving and thrift amongst its members. Nidhi companies are allowed to take a deposit from and lend to the members only. In other words, the funds contributed to a Nidhi company come only from its members (shareholders) and are to be used only by the shareholders of the Nidhi Company.
The name “Nidhi” in Nidhi Company means “treasure” and it originates from the Hindi vocabulary.
Nidhi Company is a certain category of NBFC. Though not directly regulated by the RBI, still RBI has powers to issue directives for them related to their deposit acceptance activities. Moreover, because these Nidhis deal with their shareholder-members only, they have been exempted from the core provisions of the RBI Act and other directions applicable to NBFCs. Therefore, Nidhi Company is an ideal legal entity to take a deposit from and lend to a specific group of people.
Nidhi Company Registration
Section 406 of the Companies Act of 2013 and the Companies (Nidhi Companies) Rules of 2014 provide all the provisions concerning the incorporation and governance of the Nidhi Companies in India.
The guidelines and directives for the Nidhi Companies are also issued by the RBI. These are mainly related to financial activities and investments by companies including the NBFCs.
Because of the reason that the Nidhi Companies are engaged in the business of deposits and loans by its members only, certain exemptions have been provided to these companies, by the RBI.
The interest charged at the loans under a Nidhi Company is quite reasonable. The purposes these are sought are, generally, manufacturing/renovation of houses or child’s education, etc. The loans are provided against security only.
The deposits under Nidhis do not earn much interest as compared to deposits in the organized banking sector.
All lending and borrowing of the Nidhi Companies are done by its members, exclusively. Hence, such companies are also referred to as Mutual Benefit Societies. Because they work for the mutual benefit and welfare of all members.
If you are looking to start a business in financing or loans in India, then Nidhi Company is the best option for it.
Some points about the working of Nidhi Companies in India, as mentioned in Rule-6 of the Nidhi Rules of 2014, are significant to note:
It cannot carry any of the following kinds of transactions. Such as leasing finance, hire purchase finance, chit fund, insurance, or acquisition of securities issued by any corporation.
It cannot accept deposits from or give loans to some external individual or corporation.
A Nidhi Company is not empowered to issue preference shares, debentures, or some other debt instruments in any form.
Companies Act 2013 and Nidhi Rules 2014 are the governing bodies regulating the functions and operations of Nidhi Company in India.
Nidhi Company does not come under the purview of RBI. Therefore, Nidhi does not need any license from RBI to operate a loan business.
It is not entitled to perform vehicle finance business or microfinance business in India.
Within 12 months of registration, the number of members must be at least 200.
A maximum interest rate of 20% p.a. (calculated by the reducing balance method) can be charged.
The maximum rate of interest that can be offered on saving deposit account shall not exceed 2% above the rate offered by Nationalised Banks.
Nidhi Company can accept FD, RD & savings and can earn an interest of 12.5% currently.
Rate of Interest that can be offered on Fixed and Recurring Deposit shall not exceed the maximum rate of interest prescribed by RBI for the NBFCs to offer on their deposits. The maximum limit of the rate of interest for NBFCs is also applicable to the Nidhi companies.
Operations limited to district level for the first 3 Years. After completion of 3 years, 3 offices can be set up within the same district. For expansion out of the district, prior approval from the Regulator Director is required.
It can only give loans against security. These securities may be Gold, Property, Fixed Deposits, Government Securities or Life Insurance Certificates.
Unencumbered deposits (Deposits not offered as securities for any purpose) should not be less than 10 % of outstanding deposits.
Filing of Annual Accounts, Audit, and Tax Returns, in the proper format, is compulsory.
Benefits of Starting a Nidhi Company
The central goal behind establishing a Nidhi Company is to encourage its members to save so that they can meet their financial requirements arising from time to time smoothly. By being thrifty they become self-sufficient and would meet the future expenses that may come up. And the benefit of getting a company registered as Nidhi doesn’t end there.
There are many more advantages to forming a Nidhi Company. Some are listed below:
Liability is Limited: Liability of Directors and shareholders of the Nidhi Company is limited. In case the company suffers from any loss and faces financial distress in the course of its business activity, the personal assets of any of the Directors or members are not at risk of being seized by banks, creditors, and government.
Less Regulations: Nidhi companies are governed under the Nidhi Rules, 2014. The Central Government is the regulating authority controlling its activities and operating. Guidelines imposed by the RBI on Nidhis are very few.
Better Credibility: Nidhi companies enjoy better credibility as opposed to any other members based organizations like Trusts, Cooperative Societies or NGOs.
Better Option for Savings : The main purpose of Nidhi Company’s incorporation is to encourage the habit of saving among the members of the Company. This is how it achieves the other goal of its registration of being mutually beneficial. The Nidhi Companies are to lend and borrow money to and from its shareholders/members only.
Easy Access of Public Funds: The loans from the Nidhi Company come at a cheaper rate than loans from banks and other NBFCs. For its shareholders. And the process of obtaining the loan and customized services are much more convenient and quicker.
Ease of Fund: Nidhi Company is the safest and the cheapest way of inviting deposits from the general public. You just need to take them as registered members.
Micro Banking: Nidhis provide banking services to the remote and rural public of India which still is based in far-off locations and is, hence, devoid of accessing finance from national banks and NBFCs.
Better Credit Co-operative Society: Nidhi Company is a close substitute for credit co-operative society. And, therefore, more preferred by the small financer. Once a Nidhi company has been registered, the members can avail of all the benefits of credit co-operative society.
Simple Processing: Borrowing and lending to known persons, belonging to the same group, is much less complicated than dealing with banks, where the procedure is impersonal and fixed.
Easy Registration Process: The process to register Nidhi Company with LegalRaasta is quite simple and transparent. You don’t need to take any license from RBI. You just have to incorporate your company as a public limited one with the MCA.
Single Regulatory Body: After the Amendment in Companies act 2013, Nidhi Companies are overseen by Nidhi Company Rules.
Low Capital Requirement: Ministry of Corporate Affairs (MCA) commands that the minimum capital requirement of Rs. 5 lakhs for Nidhi. And, within 1-year, the capital has to be raised to at least Rs. 10 lakhs. The Fees, DIN, DSC & Other Expenses are approx. Rs. 25-30,000. These include Government fees that differ from State to State.
Fulfilling the needs of Lower & Middle-income groups: Nidhi Companies play an important role in meeting the needs of lower and middle-income groups by providing them financial help without complex formalities and documentation.
Easier Eligible: People getting minimum wages and belonging to lower strata are usually unable to take loans from traditional banks because of their high eligibility criteria. For them, Nidhi Company is a good option to obtain finance because of fewer conditions.
No External Involvement: Nidhi Companies take funds from their members and further provides loans to their members only. All transactions are done within this group only. So, no external factors are affecting the working of these companies. The investors/members themselves oversee the operations of the company.
Separate Entity: Nidhi Company is a separate legal entity that can acquire assets and incur debts in its own name.
Requirements for Nidhi Company Incorporation
Given below are the essential conditions that must be met with for registering or operating a Nidhi Company.
Procedure for Nidhi Company Registration
Though the process of registering a Nidhi Company is simple, still, assistance from a professional is advised to complete the various complex forms, filing them and within time. Moreover, the government portals and language are a bit on the difficult side, too.
And LegalRaasta is an expert in Nidhi Company Incorporations, with over 7 years of experience in the field and successfully registering more than 500 Nidhi Companies. Our operations are spread all over India.
Why Choose LegalRaasta
Get the edge over others with a highly qualified team of professionals of LegalRaasta. And get highly ranked professional services with full customer satisfaction. We assist with each step of company registration so that you can concentrate on your business.
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Passport Sized photographs of all the directors.
ID proof of all the designated directors and shareholders. (PAN card and Passport are valid).
Address proof of all the directors and members (Ration Card, Aadhaar Card, Passport, Voter ID, and Utility Bill – electricity/water/mobile).
Address Proof of the Company. Make sure that the address proof is not older than 2 months.
Copy of the Property papers (if the property is owned).
NOC (No-Objection-Certificate) from the owner (if the property is rented).
Compliances for Nidhi Company
NDH-1 Form: A Nidhi Company has to submit the list of members within 90 days from the end of every financial year, in this Form.
NDH-2 Form: It can request MCA for an extension in this Form, in case it has not been able to add 200 members in its first financial year.
NDH-3 Form: Other than the above NDH-1 Form, a half-yearly return is also required to be filed in NDH-3 Form.
Annual Returns with ROC: The Nidhi Company has to file its Annual Returns with MCA through Form MGT-7.
Profit & Loss Statement and Balance sheet: The financial statements and other related documents are to be submitted, annually, in Form AOC-4.
Income Tax Returns: Nidhi Company, like all other businesses, must file its Annual Income Tax Returns by 30th September of the following financial year.
Deposits & Loans
Here we understand the regulations governing the loan and deposit under Nidhi Company.
Restrictions on Nidhi Company
Though the sole purpose of Nidhi companies is taking up non-banking financial activities, they are prohibited to perform those transactions that may involve external factors and public, taking risks, etc. Such as:
- Advertise themselves to invite deposits,
- Chit funds,
- Leasing Finance,
- Hire-Purchase finances,
- Sell, pledge or mortgage the assets kept with it as security for a loan,
- Getting into a partnership for carrying out lending and borrowing activities,
- Taking deposits or lending funds to someone other than its shareholders,
- Issue preference shares, debentures or any other debt instruments,
- Issue equity shares of the nominal value of over Rs. 10/- each,
- Provide its deposit holders equity shares exceeding 10 or shares of the value of more than Rs. 100/-,
- Open a current account with its members (though it is allowed to open a Savings Account),
- Lend to or take a deposit from a corporate,
- Pay commission, fee or incentive for mobilizing deposits,
- Carry on any other business than borrowing and lending to its members,
- Hire a Purchase Financer,
- Pay any brokerage for granting a loan to its members.
What is included in Our Nidhi Company Registration Package
Frequently Asked Questions
Nidhi Company is a category of Non-Banking Financial Company (NBFC) that does not require any license from the Reserve Bank of India (RBI). It is formed for the sole purpose of accepting deposits and lending loans to its members only. It works through its members only.
The Nidhi company must be registered as a Public Limited Company, under the Companies Act, 2013. This essentially means that there are at least 3 Directors and 7 Shareholders. Further, its MoA (Memorandum of Association) must state that the main objective of the proposed company is to promote thriftiness and a habit of savings among its members.
2. Search a unique name in 3 options and get approved by ROC for 1,
3. Submit of MoA & AoA,
4. Certificate of Incorporation & CIN,
5. Take PAN, TAN & Bank Account.
• Passport size photograph of Directors,
• Copy of address proof of Director,
• Copy of address proof of company. Property proof (If owned property), Rent agreement (in case of rented property), electricity/water bill, etc. are valid,
• Landlord NOC (in case of rented property).
A Nidhi company is not to accept deposits of more than 20 times of its Net Owned Funds (NOF) as per its last audited financial statements.
And it should end with Nidhi Limited.
Nidhi Companies are regulated by Nidhi Rules, 2014. These rules were introduced by the Central Government and contain the regulatory policies for Nidhi company operations.
2. Is over 18 years of age.
1. Register at least 200 members.
2. Maintain minimum net owned funds (NOF) of Rs. 10 Lakh.
3. Maintain NOF to deposit ratio of 1:20.
4. Of all the outstanding deposits, at least 10% must be unencumbered term deposits.
No rules have been laid down barring a salaried person to become a director of a Nidhi Company. But your employment agreement may mention put some restrictions on you doing so.
You just need:
1. Rent agreement along with the latest rent receipt (if the place is rented).
2. NOC from the Owner.
3. House tax receipts (if the premises are owned)
4. Electricity bill.
• Nidhi Company cannot issue preference shares, debentures or any other such instrument.
• It cannot accept deposits nor lend money, other than its members.
• These companies cannot pay any incentive for mobilizing deposits.
DIN or “Director Identification Number” is given to an existing Director or potential Director of any Company which is incorporated or is to be incorporated. It is a Unique Identification Number, issued by the MCA.
NOF or Net Owned Fund = Paid up share capital + Free Reserves – Accumulated losses, deferred revenue expenditure, and other intangible assets.
2. The time duration for Fixed Deposits is a minimum of 6 months to a maximum of 60 months.
3. For Recurring Deposits, it is a minimum of 12 months to a maximum of 60 months.
4. Nidhi Company can invest and keep invested, in unencumbered term deposits with a scheduled commercial bank (other than a co-operative bank or a regional rural bank), or post office deposits in own name, an amount which must not be less than 10% of the deposits outstanding at the close of business on the last working day of the second preceding month. In some emergency, the limit of 10% can be reduced only after seeking approval of the Regional Director.
A Nidhi company is registered as a Public Limited Company. Hence, the requirements for incorporation of a Nidhi company covered a minimum of three Directors and Seven Shareholders. However, the MOA of a Nidhi company must state that the primary objective of the proposed company is to nurture and promote a habit of thriftiness and savings among its members, and accept deposits from or lend loans only to its members, for the mutual benefits of them.
The Company uses the funds in lending to the Shareholder/members only as per the Nidhi company rules. Nidhi Company lending is in the shape of small loans for business and microfinance.
Only shareholders/Members of the Nidhi Company who have a membership ID, can invest in the scheme. To be a member, you must be 18-years and above as per age proof and must be a citizen of India.
– Nidhi Companies are strictly prohibited from engaging in the following types of businesses:
– Business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by anybody corporate. Nidhi Companies cannot carry on any business other than the business of borrowing or lending in its own name.2. General Restrictions :
– Nidhi Companies cannot issue any shares, debentures or any other securities by any name or in any form whatsoever.
– Nidhi Companies cannot open current account with its members. Please note, there is a restriction on current account that means you can still open savings account with the members.
– Nidhi Companies cannot issue or cause to be issued any advertisement in any form for soliciting deposit.
– Nidhi Companies cannot pay any brokerage or incentive for mobilising deposits from members or for deployment of funds or for granting loans.
A Nidhi Company can open 3 branches in its district only if it has earned profits after tax consistently during the preceding three financial years. For any additional branch, Nidhi will be first apply for approval from the Regional Director.
LegalRaasta provides Nidhi Company incorporation services across India in all cities. We have done Nidhi company registration in Mumbai, Delhi, Gurgaon, Noida, Bangalore, Chennai, Hyderabad, Ahmedabad, Kolkata, Surat, Pune, Jaipur, Lucknow, Kanpur, Nagpur and other Indian cities.
Legalraasta.com is one of the best online service portals to help register Nidhi Companies in India. We have 10 years of experience in application of Nidhi Company registration. LegalRaasta has 30+ regional offices in India and expand its network in India with 2000+ customers for Nidhi Company.