Those willing to do the Business of Finance without Incorporating a Non Banking Finance Company can do so by opting to Incorporate a NIDHI Company which is easy to form and less regulated by RBI. On the other hand, incorporating a NBFC is a difficult task as it involves stringent procedures, conditions to incorporate a NBFC.
Nidhi in the Indian context / language means “TREASURE”. The Companies doing Nidhi business, viz. borrowing from members and lending to members only, are known under different names such as Nidhi, Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company. Since Nidhi’s come under one class of NBFCs, RBI is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these Nidhi’s deal with their shareholder-members only, RBI has exempted the notified Nidhi’s from the core provisions of the RBI Act and other directions applicable to NBFCs.
The provisions related to Nidhi are provided under Section 406 of the Companies Act, 2013 read with Nidhi Rules, 2014 which defines nidhi as a company which has been incorporated as a nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending to its members only for their mutual benefit.
- NIDHI to be incorporated as Public Company with minimum paid up capital of Rs 5 lac.
- It can’t have any object other than the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending to its members only for their mutual benefit.
- Within 1 year of commencement NIDHI has to ensure that it has not less than 200 hundred members.
- Net Owned Funds of Rs 10 lac or more.
- Ratio of Net Owned Fund to Deposit of not more than 1:20.
RESTRICTIONS ON NIDHI:
No nidhi shall-
- Carry on the business of chit fund, hire purchase, leasing finance, insurance or acquisition of securities,
- Issue preference shares, debentures,
- Open current account of its members,
- Accept deposits from or lend to any person other than it members or any body corporate,
- Issue any advertisement, enter into any partnership agreement to solicit deposits, pay any brokerage to solicit deposits.
- Nidhi to issue equity shares of nominal value of not less than Rs 10 each.
- Each deposit holder shall be issued minimum of 10 equity share or share equal to 100 Rs.
- Saving account holder and recurring deposit holder shall hold at least 1 equity share of Rs 10.
- Body Corporate can’t be a member
- Trust can’t be a member
- Minor can’t be member
- NIDHI can open up-to 3 branches in a District if it has earned net profit during 3 Preceding Financial year and for more than 3 branches prior permission of Regional Director shall be obtained
- Branches, offices can’t be open outside the state where its Registered Office is situated
- A NIDHI SHALL NOT ACCEPT DEPOSITS EXCEEDING 20% OF ITS NET OWNED FUNDS
- FIXED DEPOSIT CAN BE ACCEPTED FOR MINIMUM OF 6 MONTHS OR MAXIMUM OF 60 MONTHS
- RECURRING DEPOSIT CAN BE ACCEPTED FOR MINIMUM OF 12 MONTHS OR MAXIMUM OF 60 MONTHS
- MAXIMUM BALANCE WHICH CAN BE KEPT IN SAVINGS DEPOSIT ACCOUNT SHALL NOT EXCEED 1 LAC RS
- RATE OF INTEREST WHICH CAN BE OFFERED ON SAVING DEPOSIT ACCOUNT SHALL NOT EXCEED 2 % ABOVE THE RATE OFFERED BY NATIONALISED BANK
- RATE OF INTEREST WHICH CAN BE OFFERED ON FIXED AND RECURRING DEPOSIT SHALL NOT EXCEED THE MAXIMUM RATE OF INTEREST PRESCRIBED BY RBI WHICH THE NBFC OFFER ON THEIR DEPOSITS
NIDHI can give Loan to a member subject to the following limits:
|Total amount of deposits||Loan amount which can be given to a member|
|Less than 2 crore||2 lac|
|More than 2 but less than 20 crore||7.5 lac|
|More than 20 crore but less than 50 crore||12 lac|
|More than 50 crore||15 lac|
*MAXIMUM RATE OF INTEREST WHICH CAN BE CHARGED BY NIDHI ON LOAN TO ITS MEMBER SHALL NOT EXCEED 7.5 % ABOVE THE HIGHEST RATE OF INTEREST OFFERED BY NIDHI ON ITS DEPOSIT.
AUDITOR AND DIRECTOR:
- Director to be member of NIDHI
- Director shall hold office for a term of 10 consecutive years and eligible for reappointment after expiry of 2 years
- Individual Auditor shall be appointed for a term of 5 consecutive years
- Auditor firm shall be appointed for a 2 terms of 5 consecutive years
- Return of Statutory Compliances in form NDH-1 within 90 days of close of Financial Year
- Half Yearly Return in form NDH-3 within 30 days of conclusion of each half year
- A Certificate from Auditor of the Company every year to the effect that NIDHI has complied with all provisions of Rules.