The article explains the closure of Nidhi Company. Like every other Company, the Nidhi Company...
This article throws light about the working of Nidhi Company Loan system and charging of loan and Interest by Nidhi Companies, from the legislative requirement. Nidhi Company is a kind of 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 the registered members and provide loans to its members only. This means Nidhi Company loans are for the shared advantage for 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 functioning of the banking system, RBI has formalised the channels of NBFC. There are financial institutions in the form non-banking have been formed like Nidhi Company. The Nidhi Company have reached to the smaller sections of the society.
They function as:
The lending of money is a significant feature of the Nidhi Company. Here are some of the loans which can be provided by Nidhi Company Loan system:
A loan of Rupees 2 lakh to any individual, if the capacity stored is 2 Crores.
No unsecured loans or Microfinance loans by Nidhi Companies.
The maximum period of Gold credit is 1 year
The reimbursement period over the advance against property cannot exceed 7 years.
In the case of gold loan, the maximum amount of loan which can be provided is 80 % of the Gold value.
Loan against property, the maximum amount which can be provided is 50% of the property value.
No loan for vehicles can be provided by Nidhi companies.
The acceptance of deposits is the key feature of Nidhi Company, here are some features:
Particulars- deposit Amount
Deposit less than 2 Crores
Two Lakhs Rupees
A Deposit of 2 crores less than 20 Crores
Seven Lakh fifty thousand
Deposit more than 20 Crores but less than 50 Crores
Twelve Lakhs Rupees
The total amount of deposit is more than 50 Crores
Fifteen Lakhs Rupees
Rule 16 of Nidhi Company Rules, 2014
The maximum rate of Interest which is chargeable under Nidhi Company Loan system-
7.5% + Maximum Rate offered on Deposits
It can be understood as:
Maximum Rate of Interest on Loan
It can be concluded that the rate of Interest on loans should be charged using the reducing balance method. The Company Loan system shall be to 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 at the notice board at the registered office and branch office. When the request is made to a Nidhi Company to repay the deposit after 3 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.
Read our article:How to Register a Nidhi Company in India?