A Nidhi Company is a type of non-banking financial
institution (NBFC) in India. The term "Nidhi" in Sanskrit means
"treasure," and these companies essentially function as mutual benefit
societies. Their main objective is to cultivate the habit of thrift and savings
among their members and to lend funds to their members in need.
Here are some key
characteristics of Nidhi Companies:
Incorporation:
Nidhi Companies are incorporated as public limited companies under the
Companies Act, 2013 in India. They are regulated by the Ministry of Corporate
Affairs (MCA).
Membership: Nidhi
Companies primarily serve their members, and membership is limited to
individuals. These companies cannot accept deposits or provide loans to anyone
other than their members.
Objectives: The
primary objectives of Nidhi Companies include promoting savings, mutual
benefits among members, and providing financial assistance to their members in
times of need.
Limited Operations:
Nidhi Companies have restrictions on the kind of business activities they can
undertake. They are not allowed to engage in the business of chit funds,
hire-purchase finance, or leasing finance, among other activities.
Ownership: The
ownership structure of a Nidhi Company is characterized by its mutual benefit
nature, where the members have a say in the management of the company.
Minimum Capital
Requirement: Nidhi Companies are required to have a minimum amount of net
owned funds as per the regulations, ensuring financial stability.
It's important to note that Nidhi Companies are distinct from other types of NBFCs and are designed to provide financial services within a closed group of members for their mutual benefit. They are subject to regulatory oversight to protect the interests of their members and maintain financial stability.
Browse practical answers curated by our CA and CS desks for NIDHI COMPANY.
A Nidhi Company can be formed by at least 7 members, and it must have a minimum of 3 directors. It operates primarily among its members.
It offers a simple structure, low regulatory requirements, and promotes thrift and savings within its members, helping them access affordable financial services.
Registration is done with the Ministry of Corporate Affairs (MCA) by submitting required documents like the company’s name, address, and details of members and directors.
Nidhi Companies are regulated by the Reserve Bank of India (RBI) and the Ministry of Corporate Affairs (MCA). They must comply with rules regarding borrowing and lending only among their members.
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