Nidhi Company is one of the most popular business entity in India. It works between its members. This is known as Nidhi Mutual benefits company, and a type of NBFC. In This article, We're going to explain what is nidhi company and how it works in India.
Nidhi Company is a type of Non-Banking Financial Company (NBFC). It is planned to borrow and lend money to its affiliates. It implants the manner of saving among its members and works on the principle of mutual advantage. Nidhi companies are registered under section 620A of the Companies Act, 1956(Section 406 of the new Companies Bill 2012, as passed by Lok Sabha) and is governed by the Ministry of Corporate Affairs (MCA).Nidhi Company. Nidhi Company is a type of NBFC governed by Section 406 of the Companies Act, 2013. The Reserve Bank of India (RBI) releases Nidhi Company from registration and other related compliances. A Nidhi Company is authorized to deal only with its members. Nidhi Company branches can be opened only when it has earned a net profit after tax constantly during the three preceding years.
Nidhi Company is a non-banking financial business structure. Nidhi Company performs the functions of lending and borrowing of money within its members where it works through its members only. Nidhi Company is also called as a mutual benefit company. Vehicle Finance by Nidhi Company: This type of loan is also not allowed under Nidhi Company. Vehicle finance is allowed to Non-Banking Financial Companies (NBFC) in India.
How does Nidhi company make money?
To fulfill this objective of cultivating the habit of saving and thrift amongst its members. Nidhi companies are allowed to take a deposit from and lend to the members only. In other words, the funds contributed to a Nidhi company come only from its members.
However, unlike NBFCs and Banking Companies a Nidhi company does not require a license from the Reserve Bank of India (RBI) to operate. A Nidhi Company works through its members. Any person who is a member of a Nidhi can make deposits and borrow or take loans when need be.
Can Nidhi company give a gold loan?
Nidhi Company can give loans against gold, that also called “Gold Loan”. Gold Loans are subject to certain rules and regulations as per Nidhi Rules, 2014. Here are the following conditions: The maximum finance against the gold shall be up to 80%. Nidhi Company can accept fixed deposits like bank/NBFC and can offer a lucrative interest to attract the rational investor/member. ... However, unlike Bank and NBFC, Nidhi Company is not allowed to accept funds for more than 5 years (60 Months).
How do Nidhi companies work?
The literal meaning of Nidhi is 'fund', 'finance or treasure' Nidhi Company is incorporated with the object of developing the habit of thrift and save and reserve the funds amongst its members and also receiving deposits and lending from and to its members only, for their mutual benefit. Legal framework and regulatory bodies regulating the functioning of Nidhi Companies. Nidhis are companies registered under Section 406 of the Companies Act, 2013 (or Section 620A of the Companies Act, 1956) and is regulated by the Ministry of Corporate Affairs (MCA). NBFCs are wholly or partially regulated by the RBI.
Which kind of business NBFC Cannot do?
Financial Organisations which do not need an NBFC license:
Insurance Companies are regulated by the Insurance Regulatory and Development Authority of India (IRDA) Housing Finance Companies which are regulated by the National Housing Bank.
How can I join the Nidhi company?
How to make members In Nidhi Company –step by step procedure
Attach the share certificate with FORM SH – 4: Form SH – 4 is being used to give effect to the share transfer, Attach along with Membership Form, Hand over the share certificate to him, Pass board resolution for each entry, Enter details in Share Transfer Register.
Can Nidhi company give unsecured loans?
Nidhi Company businesses – What all are allowed
As said, Nidhi Company is not allowed to do microfinance business or in other words, Nidhi Company is not allowed to provide unsecured loans to its members. Nidhi Company can only lend a settled loan that too only to its members.
Can Nidhi company open a current account?
Nidhi Company is a type of but it is not the substitute to fully-fledged NBFC or a Bank. Hence, it is not allowed to open the current account.
How does a Nidhi company work?
Nidhi Company is a type of Non-Banking Financial Company (NBFC). It is formed to borrow and lend money to its members. It inculcates the habit of saving among its members and works on the principle of mutual benefit.
What is the Nidhi scheme?
NIDHI (National Initiative for Development and Harnessing Innovations), an umbrella program is pioneered by the Department of Science & Technology (DST), Government of India, for nurturing ideas and innovations (knowledge-based and technology-driven) into successful startups.
Is Nidhi company a public company?
Nidhi Company is generally incorporated as a Public Limited Company. The main aim of Nidhi Company can only be of nurturing the habit of caution and savings among its members, receiving deposits from them, and lending money to its members only for their mutual benefit.
Conclusion
No doubt Nidhi is easy to form compare to other forms of business entities or NBFCs (Non-Banking Financial Companies). if you want to Register a Nidhi Company, You may contact to Swarit Advisors or you can directly through its official website.
