Nidhi Finance Companies are an important source of credit for small and medium-sized businesses and individuals who may not have access to formal banking channels. Nidhi Company is a type of non-banking financial company (NBFC) that primarily deals with accepting deposits and providing loans to its members. Here are the essential requirements for Nidhi Company registration in India:
What is Nidhi Company
A Nidhi Finance Company is a type of non-banking financial company (NBFC) in India, that is formed for the purpose of promoting savings and providing credit facilities to its members. The term ‘Nidhi’ in Hindi means ‘treasure’, and these companies are essentially mutual benefit societies, where members pool their savings and lend to each other.
The main objective of a Nidhi Finance Company is to encourage thrift among its members, and to provide them with credit facilities at a reasonable interest rate. Nidhi companies are regulated by the Ministry of Corporate Affairs (MCA) and are governed by the Nidhi Rules, 2014.
Some of the key features of Nidhi Finance Companies include the following:
- They accept deposits from their members and provide loans and advances to them.
- They are required to have a minimum of 200 members, and net owned funds of at least Rs. 10 lakh.
- They cannot issue preference shares, debentures or any other debt instrument, and are not allowed to deal in any form of chit fund activities.
- They are not allowed to carry on any business other than that of a Nidhi company.
- They are required to maintain certain ratios, such as the Net Owned Funds to Deposits Ratio (NOFDR) and the Net Owned Funds to Risk Weighted Assets Ratio (NORWAR).
Requirement of Nidhi Company Registration
- Minimum number of members: To register a Nidhi Company, it must have a minimum of seven members.
- Incorporation: The company must be registered as a public limited company under the Companies Act, 2013.
- Minimum capital requirement: The minimum paid-up capital required for a Nidhi Company is Rs. 5 lakh.
- Name availability: The proposed name of the company must be unique and not similar to any existing company or trademark.
- Object clause: The object clause of the company must include the acceptance of deposits and lending to its members.
- Management and control: The company must have a board of directors consisting of at least three directors, and the majority of them must be individuals.
- Branches: A Nidhi Company can only have branches within the district where it is registered.
- Compliance: The company must comply with the rules and regulations laid down by the Ministry of Corporate Affairs and the Reserve Bank of India.
- Nidhi Company Software: Nidhi Company Software is required for proper management of the company, to maintain all transactions, account management, deposit and loan management, and other financial activities.
Once the above requirements are fulfilled, the application for Nidhi Company registration can be submitted to the Registrar of Companies (ROC). The registration process can take up to 15-20 days, and after the registration, the company can start its operations as a Nidhi Company.
Benefits of Nidhi Finance Company
One of the main benefits of a Nidhi finance company is that it provides a platform for its members to save money regularly. This helps individuals to develop a habit of saving, which is essential for long-term financial stability. Nidhi finance companies also offer attractive interest rates on savings, which can be higher than those offered by traditional banks.
Another benefit of Nidhi finance companies is that they provide easy access to credit facilities. Members of these companies can avail of loans at lower interest rates compared to those offered by banks. Additionally, the loan approval process is relatively quick and hassle-free, making it easier for members to get the funds they need.
Nidhi finance companies also promote financial inclusive by catering to the needs of individuals who may not have access to traditional banking services. These companies typically operate in rural and semi-urban areas, where banking services may not be readily available. By providing financial services to these undeserved communities, Nidhi finance companies help promote financial inclusion and empower individuals to take control of their finances.
Furthermore, Nidhi finance companies are member-owned and operated, which means that they are run for the benefit of their members rather than for the benefit of external shareholders. This ensures that the interests of the members are always given priority, and decisions are made in their best interests.
In summary, Nidhi finance companies provide a range of benefits to their members, including easy access to credit facilities, higher interest rates on savings, and a focus on financial inclusion. These companies play an important role in promoting financial stability and empowering individuals to take control of their finances.
Nidhi finance companies are non-banking financial institutions that provide financial services to their members. These companies are regulated by the Ministry of Corporate Affairs under the Companies Act, 2013, and are commonly found in India. The main objective of a Nidhi finance company is to encourage savings among its members and provide them with easy access to credit facilities.
