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A Nidhi company known by the name of Mutual Benefit Companies is a legal company which can accept deposits as well as lend loans only to its members. The profit earned by the members is shared among themselves.
If you are planning to incorporate a Nidhi Company, then you should look into the restrictions that are imposed on a Nidhi company in general terms as per the Nidhi rules, 2014.A Nidhi company comes under the purview of a non-banking financial institution or an NBFC and does not require any approval from the RBI or the Reserve Bank of India.
The Nidhi rules govern a Nidhi company, 2014[1]. Some of the restrictions on Nidhi company are listed below-
Nidhi Company is not dynamic and flexible to work as much as other companies are. It has its advantages as well as limitations. There are restrictions on the working of a Nidhi company since its deals in money related matters that too without the RBI approval, so the restrictions are bound to be there. Keeping in mind these restrictions on Nidhi Company, a start-up can choose the form of business ownership.
Read our article: Maximum Rate Interest Loan by Nidhi Company
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