Nidhi companies accept deposit as well as lend loans only to its member for their mutual benefi...
Nidhi companies are established for initiating and promoting the practice of savings amongst its members. Therefore, they do not deal with the funds of any person other than their members. Traditionally, ‘Nidhi’ means ‘to treasure’. In the recent context, ‘Nidhi’ means to promote the mutual benefit of members. It is for this reason, Nidhi companies are also known by the name of Mutual Funds, Mutual Benefit Company, etc. Moreover, only individuals can become members of a Nidhi Company, who contribute their savings, which is the principal source of funds of a Nidhi Company. Such a company also provides loans to its members at a reasonable rate of interest for the construction of a house, repairs of a house, etc. Here we will tell How to Register a Nidhi Company?
As its operations are quite similar to that of NBFCs, Nidhi companies also come under the purview of the Reserve Bank of India (RBI). However, since its dealings in deposits and loans are only limited to its members, they are exempted from the core regulatory compliances of an RBI.
As per the Companies Act, only a public limited company having a minimum of 7 members and 3 directors can be incorporated as a Nidhi Company. The objectives of a Nidhi Company shall be well reflected in its Memorandum of Association as its object clause.
Now, when we are clear about the concept of a Nidhi Company, let’s take a look at the procedure to be followed for the Registration of Nidhi Companies:
Once it is registered as a public company, then, within one year of the incorporation of a Nidhi Company, the following conditions must be satisfied:
Due to its easy formation and limited rules for Nidhi Company offers the following advantages:
No Nidhi Company shall carry out any of the following activities:
On the whole, it can be said that the Nidhi Companies are an alternative to the banking system in the country, which caters to the financial needs and provides financial services to only its members. Its coverage is narrower than that of banks and has the functionality of a public limited company.
Recommended Article: Nidhi Company Registration: Applicability, Requirements & Procedure.