Nidhi Company is a form of entity that carries out financing activities. The process of registering a Nidhi company is seamless and requires less time and effort. When this company is formed, it is registered as an NBFC (Non-Banking Financial Company).
Nidhi Company is governed by Section 406 of the Companies Act, 2013 and Company Nidhi Rules, 2014 which has a sole objective of cultivating the habit of thrift and savings amongst its members. Nidhi companies are allowed to take deposit from its members and lend to its members only. Therefore, the funds contributed for a Nidhi company are only from its members (shareholders) and used only among the shareholders of the Nidhi Company.
Nidhi Company is a class of NBFCs and RBI is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these Nidhi’s deal with their shareholder-members only, RBI has exempted the notified Nidhi’s from the core provisions of the RBI Act and other directions applicable to NBFCs. Therefore, Nidhi Company is an ideal entity to take deposit from and lend to a specific group of people.
It’s easy for Nidhi Company to get funding or borrow capital from or lend money to group members.
Easy to Manage
No External Involvement in Management
Relaxation in Compliances
Easy Transfer of Ownership
Low Rates of Interest
Secured Investments
Clear Objectives for easy donations and loans
Exemptions and Privileges under Companies Act, 2013
Least intervention of R.B.I.
Sr. No | Deposits accepted from Members (in Rs.) | Loan amount eligible (in Rs.) |
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1 | Less than Rs. 2 Crores | Rs. 2,00,000 |
2 | More than Rs. 2 Crores but less than Rs. 20 Crores | Rs. 7,50,000 |
3 | More than Rs. 20 Crores but less than Rs. 50 Crores | Rs. 12,00,000 |
4 | Exceeds Rs. 50 Crores | Rs. 15,00,000 |
However, in the event the Nidhi Company has not earned profit during preceding three years, the eligible loan amount shall be only 50% of what is mentioned above i.e. Rs. 100000, Rs. 375000, Rs. 600000 and Rs. 750000 respectively.
The profits and loss statement and Balance sheets are to be submitted as per the requirements of the Company on an annual basis. This is done through form AOC 4
A Nidhi Company is required to file Income Tax Returns as per the Income Tax Act requirements.
A Nidhi Company must have Net Owned funds that are more than Rs. 10 lakhs. The ratio must be in the proportion of 1:20 Basis.
Sr. No | Type of Security | Terms of Repayment |
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1 | Gold, silver and jewellery |
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2 | Immovable property |
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3 | National Savings Certificates, other Government Securities and insurance policies | Maturity date of such securities shall not fall beyond the loan period or one year whichever is earlier. |
4 | Fixed Deposit | The period of loan shall not exceed the unexpired period of the fixed deposits. |
However, in the event the Nidhi Company has not earned profit during preceding three years, the eligible loan amount shall be only 50% of what is mentioned above i.e. Rs. 100000, Rs. 375000, Rs. 600000 and Rs. 750000 respectively.
*In case of loan against jewellery, the loan to value ratio shall not exceed 80 percent i.e. the amount of loan given shall not exceed 80% of the value of the property.
**In case of loans against immovable property, the total loans (against immovable property specifically) shall not exceed 50% of the overall loan outstanding.
The rate of interest to be charged on any loan given shall not exceed 7.5% above the highest rate of interest offered on deposits. For instance, in case the Nidhi Company is offering 5% rate of interest on fixed deposit and recurring deposit and also 3% on savings, then the Company can chare up to maximum 12.5% on loan given..
Further, the following are the limitations on charging rate of interest from its borrowers: