Nidhi Company

Loan and Interest of Nidhi Company: A Legislative Requirement

Loan and interest of Nidhi Company

This article throws light on the working of the Nidhi Company Loan system and the charging of loans and Interest by Nidhi Companies from the legislative requirement. Nidhi Company is a non-banking financial institution-NBFC. However, there is a fundamental difference in the working of the two institutions. Nidhi Company is bound to accept deposits from registered members and provide loans to its members only. This means Nidhi Company loans are for the shared advantage of its members. The Nidhi company registration is done to inculcate the habit of thrift and saving among its members.

The banking system of the country comprises the backbone of the economy. In India, banks have reached the poor; however, facilities have not reached them. The informal banking system is still prevalent in our country. To regularise the banking system’s functioning, RBI


has formalised the channels of NBFC. Some financial institutions like Nidhi Company have been formed in the form of non-banking. The Nidhi Company has reached the smaller sections of society.

Working Of Nidhi Company Loan System

They function as:

  1. Where the registered members accumulate their savings together.
  2. The Nidhi Company Loan system is where they charge a rate of Interest on loans provided to its members and has the facility to offer various types of loans to members.
  3. The Ministry of Corporate Affairs-MCA regulates the Interest charged on the loans offered by a Nidhi Company.
  4. Nidhi Company loan cannot be more than the interest rate specified by RBI and MCA.

Features Of Loans -Nidhi Company Loan System

The lending of money is a significant feature of the Nidhi Company. Here are some of the loans which can be provided by the Nidhi Company Loan system:

  • Loan to an Individual: A loan of Rupees 2 lakh to any individual if the capacity stored is 2 Crores.
  • No Unsecured Loans: No unsecured loans or Microfinance loans by Nidhi Companies.
  • Maximum Period of Gold Credit: The maximum period of Gold credit is one year
  • Advance against property: The reimbursement period over the advance against property cannot exceed seven years.
  • For Gold Loan: In the case of a gold loan, the maximum amount of loan which can be provided is 80 % of the Gold value.
  • Loan against Property: Loan against property the maximum amount which can be provided is 50% of the property value.
  • No loan for vehicles: No loan for vehicles can be provided by Nidhi companies.

Features of Deposits Made Under -Nidhi Company Loan System

The acceptance of deposits is the key feature of Nidhi Company; here are some features:

  1. The fixed deposits can be accepted for at least a minimum period of 6 months, and the maximum period is 60 months.
  2.  In the case of a recurring deposit, the minimum period is one year, and the maximum is 60 months.
  3. The maximum limit over which bank account can’t surpass is Rupees 1 Lakh.
READ  Essential Points for Nidhi Company Registration in India

Maximum Loans UnderNidhi Company Loan System

S.No.Particulars- Deposit AmountLoan Limit
1.      Deposit less than 2 CroresTwo Lakhs Rupees
2.      A Deposit of 2 crores less than 20 CroresSeven Lakh fifty thousand
3.      Deposit more than 20 Crores but less than 50 CroresTwelve Lakhs Rupees
4.      The total amount of the deposit is more than 50 CroresFifteen Lakhs Rupees

Maximum Rate of Interest to Be Charged By- Nidhi Company Loan

Rule 16 of Nidhi Company Rules, 2014

The maximum rate of Interest which is chargeable under the Nidhi Company Loan system-

7.5% + Maximum Rate offered on Deposits

It can be understood as:

S.No.Fixed DepositsRecurring DepositsSavingsMarginsMaximum Rate of Interest on Loan
1.     8%6%4%7.5%15.5%
2.     6%7%5.5%7.5%14.5%
3.     6.5%7.6%7.9%7.5%15.1%

Nidhi Company Loans Are Advanced Towards Securities

Nidhi Company Loans
  1. Gold Loan
    • Maximum finance against gold shall be up to 80%.
    • The time period for repayment shall be 12 months.
    • The rate of Interest shall not exceed 7.5%+ maximum rate of Interest on a gold loan.
    • The maximum loan to be advanced is Rs. 2 Lakh.
  2. Loan against Immovable Property
    • Maximum loan can be of Rs. 2 Lakh.
    • The repayment period is a maximum of 60 months.
    • Maximum finance is 50%.
  3. Loan against FDR and Deposits
    • The repayment period shall not exceed the period of deposit.
    • The maximum finance can be provided up to the value of Fixed Deposits under Nidhi Company.
  4. Loan against NSC or Government Bonds
    • It is rarely used.
  5. Unsecured loan by Nidhi Company
    • It is completely prohibited under the company.
  6. Vehicle Finance
    • Vehicle Finance is not allowed.

Rate of Interest on Deposits Offered By Nidhi Company Loan System

  • Fixed deposits
    • The Interest shall not exceed the maximum rate prescribed by the RBI, which the NBFC can pay to its public deposits.
    • The maximum rate of Interest offered by Nidhi Company is 12.5%.
  • Recurring Deposits
    • It is a type of monthly investment scheme.
    • The rate of Interest cannot exceed the Interest by the RBI over fixed deposits.
    • The maximum rate of Interest is 12.5%.
  • Saving Deposits
    • The Nidhi Company loan system can offer up to 6%.
READ  Requirement for Branch Opening by Nidhi Company


It can be concluded that the rate of Interest on loans should be charged using the reducing balance method. The Company Loan system shall charge the same Interest in respect of the same class of loans, and no discrimination shall be done between anyone. The Nidhi Company loan rate of Interest will be displayed on the notice board at the registered and branch offices. When the request is made to a Nidhi Company to repay the deposit after three months, the depositor shall not be entitled to any interest up to 6 months from the date of the deposit. Where the depositor requests the Nidhi to repay the deposit amount before the expiry of the period for which it is accepted, the rate of Interest shall be reduced by 2 % as the amount is withdrawn prematurely. The Nidhi Company registration under the category of NBFC is making an informal financial institution a formal one with rules like this.


What is the interest rate of FD in Narayani Nidhi?

The interest rate varies between 4 and 11 per cent.

What is the interest rate on gold loan by Nidhi Company?

The maximum amount of financing secured by gold is 80%. There will be a 12-month payback period. The maximum rate of Interest on a loan secured by gold must not be more than 7.5 per cent.

Is it safe to invest in Nidhi Company?

Yes, these savings are safe and secure since the Reserve Bank of India and the Ministry of Corporate Affairs have established certain laws and guidelines to assure the safety and security of deposits.

What is the maximum rate of Interest on the loan?

The interest rate on Nidhi loans cannot be more than 7.5% over the highest rate Nidhi Company is willing to provide on deposits.

What is the loan limit for Nidhi Company?

In the event that the total contributions for the Nidhi are less than two crore rupees, a maximum of two lakh rupees may be granted. Loans may be granted in exchange for a guarantee, such as gold, silver, or other priceless jewels.

Can Nidhi Company borrow money?

Nidhi Company is only permitted to conduct loan and borrowing activities for its members.

What is the rule 15 of Nidhi Company?

Personal loans, auto loans, hire-purchase loans, and microloans are not permissible from Nidhi Companies. The Firms Act governs Nidhi firms, which are created with the intention of instilling the habit of saving among its members.

What are the RBI rules for Nidhi?

Nidhi Finance India must always maintain a minimum net-owned fund of Rs. 10 lahks and a minimum liquidity ratio of 20%. They may provide a range of goods, including loans, recurring deposits, and fixed deposits. They are not allowed to take part in any investment operations.

What is rule 14 of Nidhi rules?

Rule 14 of the Nidhi Rules 2014 states that unencumbered term deposits must make up at least 10% of total deposits.

What is Rule 19 of Nidhi rules?

No Nidhi may re-appoint or nominate the same person as an auditor for more than one term of five years in a row.

What is Rule 20 of Nidhi Rules 2014?

Every Nidhi must abide by the prudential standards set out in this article for the revenue recognition and asset classification of mortgage loans and gem loans.

What is rule 10 of Nidhi rules?

(1) A Nidhi may only open branches if it has continually generated net profits after tax for the previous three fiscal years. (2) A Nidhi may establish up to three branches in the district, subject to the restrictions in sub-rule (1).

What is the maximum interest rate for Nidhi Company?

A Nidhi firm is not permitted to offer fixed-deposit interest rates that are higher than the maximum rate of Interest set by the RBI for NBFCs to pay on their customers’ deposits. NBFCs may offer depositors a maximum interest rate of 12.50%.

What is the maximum period for Nidhi Company?

There is a minimum fixed deposit period of six months and a maximum fixed deposit period of sixty months. A minimum of 12 months and a maximum of 60 months can be accepted for recurring deposits.

What is Nidhi Company’s benefit?

A Nidhi Company Registration Online may only offer loans to and receive deposits from its members in accordance with the conditions of the regulations, 2014. Due to the lower chance of loan default compared to other firms of a similar kind, it becomes a less hazardous investment.

How does Nidhi Company make money?

In India, a Nidhi business is a non-banking financial organisation (NBFO) that was established to encourage members to save more and build up reserve reserves. The business only has the ability to lend money to its representatives for their mutual benefit after receiving it from them.

What is the scope of Nidhi Company?

The only goal of Nidhi Company, which has a very narrow range of objectives, is to encourage savings and deposits among its members. According to data kept by the Ministry of Corporate Affairs, India now has about 350 such businesses.

Read our article:How to Register a Nidhi Company in India?



Trending Posted

Get Started Live Chat