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Nidhi Company is not permitted to do the Micro Finance business in India. Micro Finance credit is a kind of business that has been specially assigned to the Non-Banking Financial Companies (NBFCs) with the status of MFI and with a minimum net owned fund of 5 crore rupees. In this article, we shall discuss Micro Finance Business and also Gold Loan by Nidhi Company.
As mentioned earlier, Nidhi Companies isn’t allowed to do any kind of microfinance business or in other words, it is said Nidhi Company isn’t allowed to afford unsecured loans to their members. Nidhi Company can only lend a secured loan that too only to its members. Further, Nidhi Company is a type of NBFC whose business is to provide loans or to receive deposits between its members.
It is one of the main streams of business for Nidhi Companies. Gold loan by Nidhi Company is so famous but are subject to certain rules and regulation according to the Nidhi Rules, 2014[1].
Here are the conditions inter alia:
This type of loan is not very famous with Nidhi Company. However, it is an option through which Nidhi Company can pay loans to that person or individual who doesn’t have gold with them. This loan is also subject to certain conditions:
This type of loan is also advanced by Nidhi Companies. Nidhi can advance loan against FDR and also even against the deposits kept by it. Further, this type of loan is also subject to certain restrictions:
This type of loan is very rare but Nidhi Company can advance loan against these securities as well.
This type of loan is completely prohibited by Nidhi Company.
This type of loan is also not allowed under Nidhi Companies. Vehicle finance is allowed to Non-Banking Financial Companies (NBFC) in India.
In a Nidhi Company minimum 5 lakh rupees capital is required whereas in a Micro-Finance Minimum NOF to be 5 Crore. Nidhi Company is incorporated to encourage savings of the people and create fund for its own members whereas micro finance like NBFC provide financial assistance but to much weaker sections of the society like in rural areas for agricultural growth.
Though Nidhi Company falls in the category of NBFC, it doesn’t require the approval of RBI to function. It is also exempted from the main provisions that apply to other NBFCs. In case you have any query related to Gold loan by NBFC, contact Enterslice.
Read our article: Annual Compliance of Nidhi Company
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