FAQ On Nidhi Company Registration in India

Quite popular in the south India, the Nidhi Companies are also well-supported by our lawyers, right from the registration to management and governance of those in States and Union Territories located all across India. Here below, offered are brief answers to some frequently asked questions about the nidhi companies in India.

1. WHAT IS A NIDHI COMPANY?

   A Nidhi Company is different from a regular finance investment company or a non-banking financial company (NBFC), as it deals only with its members or shareholders, for the main purpose of mutual benefits of its all members. A nidhi company accepts deposits only from its members, and lends funds only to them on demand. Again, a Nidhi company is not entitled to carry out businesses/activities related with hire purchase financing, insurance, leasing finance, chit funds, acquisition of securities issued by any corporate body, etc., or issue any debt instruments (such as preference shares, debentures, etc.) in any form.

2. HOW IS A NIDHI COMPANY GOVERNED IN INDIA?

   The rules, provisions, and regulations given in the Section 406 of the Companies Act of 2013, and in the Companies (Nidhi Companies) Rules of 2014, govern and regulate all nidhi companies in entire India. Again, though the activities of the nidhi companies fall under the ambit of RBI Directives which govern activities of NBFCs and other institutions dealing with financing and investments, RBI offers certain exemptions to the nidhi companies based on the fact that these nidhi companies deal only with its members, and with no outside people or investors.

3. WHAT ARE THE REQUIREMENTS FOR REGISTRATION OF A NIDHI COMPANY ANYWHERE IN INDIA?

   A Nidhi Company is registered as a Public Limited Company. Hence, the requirements for incorporation of a nidhi company cover a minimum of Three Directors and Seven Shareholders. However, the MOA of a nidhi company must give proper space to the vital fact that, the main and ultimate objectives of the proposed company are 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.

4. WHAT ARE THE POST INCORPORATION REQUIREMETS?

   Once a Nidhi Company is incorporated, within a period of one year from the date of commencement of its activities, it must satisfy the following conditions:

   • It must have at least Two Hundred members/shareholders.
   • It should have a minimum Net Owned Funds (NOF) of Rs Ten Lakhs
   • The unencumbered Term deposits must be at least 10% of the Outstanding deposits
   • The ratio of NOF to the Deposits, should not be greater than 1:20.
5. WHAT ARE THE EXCLUSIVE ADVANTAGES OFFERED BY A NIDHI COMPANY?

   The following are three main and exclusive advantages offered by a nidhi company in India:

   • This is a single office institution governed exclusively by its members, with no external involvement.
   • This is immensely helpful to people with the middle to lower financial status, by virtue of providing loans at reasonable rates, with the minimum documentation and formalities.
   • Secured investments are guaranteed by such a mutual benefit company, by dint of its rigid membership structure.