A Nidhi Company is a type of non-banking financial organization that carries out the activities of lending and borrowing money among its members. Traditionally, the word “Nidhi” has the meaning “treasure.” Due to the growing complexity of the investment sector, borrowing and investing money is difficult for small households.The idea of a Nidhi company was introduced to help these households.

The primary reason that the Nidhi Company was found to encourage its members to live frugally and save money. In this article, several key points about the Nidhi Company will be discussedif you are planning to establish a Nidhi Company.

The Nidhi Company: A Quick Overview

According to Section 406 of the 2013 Companies Act, a Nidhi company is a particular kind of business in the non-banking finance industry of India. Their primary activity is to borrow and lend funds to their members only. They go by several names, including mutual benefit funds, permanent funds, and benefit funds.

The Ministry of Corporate Affairs regulates and governs them. A Nidhi company encourages its members to build a habit of saving money on a regular basis and only use the money in the hour of need. But before you make up your mind to register for a Nidhi company, you must go through the points mentioned below.

Norms and Guidelines

• Nidhi Company will be granted the status of a Public Limited Company.

• Within a year of its incorporation, the Nidhi Company must have a minimum of 200 members.
• Nidhi Company’s goals are limited to encouraging its members to practice thrift and saving, accepting deposits from and lending to them only for their mutual advantage.

• Additionally, within a year of its incorporation, the net-owned funds should be worth Rs. 10 lakhs or more. The Net Owned Fund to Deposit Ratio must not exceed 1:20.

Availability of Branches

• Nidhi Company branches can only be opened if they have consistently earned a net profit after clearing tax for the previous three years.

• The Nidhi company is permitted to establish up to three branches in the district after the three-year window has passed.

• The Nidhi Company may only open its branches after properly submitting an annual return and a financial statement to the Registrar.

Amount Members Can Receive After A Loan Is Approved

The following limitations have been proposed on the deposit made when loans are approved:

• If the deposit is 2 crores, then the loan will be 2 lakhs only.

• If the deposit is more than 2 crores but less than 20 crores, then the loan amount will be 75 lakhs only.

• If the deposit is greater than 20 crores but less than 50 crores, then the loan amount will be 12 lakhs only.

• If the deposit is greater than 50 crores, then the loan amount will be 15 lakhs only.

Terms and Conditions of Deposit

Each Nidhi Company must meet the following requirements before making a loan:

• The Nidhi Company’s maximum accepted deposits are limited to 20% of its net-owned funds.

• The interest rate on deposits should never be more than 2% higher than the rate offered by the Nationalized Bank.

• Fixed deposits can be accepted for as little as six months and as much as sixty months, whereas periodic deposits can be accepted for a minimum of 12 months and a maximum of 60 months.

Limitations for the Nidhi Company

A Nidhi is not allowed to engage in any of the following actions:

• To start a chit fund, hire purchase, leasing finance, insurance, or stock acquisition business.

• To sign a contract or pay a broker to ask for deposits of any kind.

• To open a member’s current account and accept deposits or lend money to anyone other than its members.

• To make available preferred stock or debentures.

• Using any of the assets submitted by its own members as security.

Make sure to get in touch with some of the top Nidhi company service providers in India if you want to establish a Nidhi company. Genious Technology is one of the few companies in India that offers a one-stop solution for all of your Nidhi company’s needs. So, if you want your Nidhi company plan to become a reality, contact Genious Technology right away!