Nidhi Company Registration
Nidhi Company Registration
Ideal for lending and borrowing amongst members
Starting At Rs. 19,999 Onwards
SAVE 60% COST…!!!
(Takes 30-40 days)
Nidhi Company Registration
About Nidhi Company
The feature that differentiates Nidhi Company from other companies, NBFCs etc. is that “Nidhi” deals with “deposits from” and “loans to” it’s members (shareholders) only, and works for the mutual benefits of it’s members. Accordingly, certain exemptions have been provided to these companies in respect of annual compliances and taxation.
Nidhi Companies in India are formed, governed, and regulated by Section 406 of the new Indian Companies Act of 2013, the Companies (Nidhi Companies) Rules of 2014, and the Chapter XXVI of the Companies Rules, 2014.
The objective of incorporating a Nidhi Company is to encourage savings amongst it’s members. And To fulfill this objective of cultivating the habit of saving amongst it’s 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 it’s members (shareholders) and are to be used only by the shareholders of the Nidhi Company.
The name “Nidhi” in Nidhi Company means “treasure” and it originates from the Hindi vocabulary.
Nidhi Company is a certain category of NBFC. Though not directly regulated by the RBI, still RBI has powers to issue directives for them related to their deposit acceptance activities. Moreover, because these “Nidhis” deal with their shareholder-members only, they have been exempted from the core provisions of the RBI Act and other directions applicable to NBFCs. Therefore, Nidhi Company is an ideal legal entity to take a deposit from and lend to a specific group of people.
Nidhi Company Registration
Section 406 of the Companies Act of 2013 and the Companies (Nidhi Companies) Rules of 2014 is comprising of all the provisions which are in relation to the “incorporation and governance of the Nidhi Companies in India”.
The guidelines and directives for the Nidhi Companies are also issued by the RBI. These are mainly related to financial activities and investments by companies including the NBFCs.
Because of “Nidhi Companies” being engaged in the business of deposits and loans by it’s members only, certain exemptions have been provided to these companies, by the RBI.
The interest charged on the loans under a Nidhi Company is quite reasonable. The purposes these are sought for, includes, manufacturing/renovation of houses or child’s education, etc. The loans are provided against security only.
The deposits under Nidhis do not earn much interest as compared to deposits in the organized banking sector.
All lending and borrowing of the Nidhi Companies is done by it’s members, exclusively. Hence, such companies are also referred to as Mutual Benefit Societies. Because they work for the mutual benefit and welfare of all members.
If you are looking to start a business in financing or loans in India, then Nidhi Company is the best option for it.
Some points about the working of Nidhi Companies in India, as mentioned in Rule-6 of the “Nidhi Rules of 2014”, are significant to note:
It cannot carry any of the following kinds of transactions. Such as leasing finance, hire purchase finance, chit fund, insurance, or acquisition of securities issued by any corporation.
It cannot accept deposits from or give loans to some external individual or corporation.
A Nidhi Company is not empowered to issue preference shares, debentures, or some other debt instruments in any form.
Companies Act 2013 and Nidhi Rules 2014 act as the governing bodies, which regulate the functions and operations of a “Nidhi Company” in India.
A “Nidhi Company” does not come under the purview of RBI. Therefore, it does not need any license from RBI to operate a loan business.
It is not entitled to perform either a “vehicle finance business or microfinance business” in India.
Within 12 months of registration, the number of members must be at least 200.
A maximum interest rate of 20% p.a. (calculated by the reducing balance method) can be charged.
The maximum rate of interest that can be offered on savings deposit account shall not exceed 2% above the rate offered by Nationalised Banks.
Nidhi Company can accept FD, RD & savings and can earn an interest of 12.5% currently.
The rate of interest that can be offered on Fixed and Recurring Deposits shall not exceed the maximum rate of interest prescribed by RBI for the NBFCs to be offered on deposits. The maximum limit for the rate of interest for NBFCs is also applicable to the Nidhi companies.
It’s operations must be limited to the district level for the first 3 Years. After completion of 3 years, 3 offices can be set up within the same district. For expansion out of the district, prior approval from the “Regulator Director” is required.
It can only give loans against security. These securities may be Gold, Property, Fixed Deposits, Government Securities, or Life Insurance Certificates.
Unencumbered deposits (Deposits which aren’t offered as securities for any purpose) should not be less than 10 % of outstanding deposits.
Filing of Annual Accounts, Audit, and Tax Returns, in the proper format, is compulsory.
You can start your Nidhi Company at about Rs. 25,000 only.
Benefits of Starting a Nidhi Company
The central goal behind establishing a Nidhi Company is to encourage it’s members to save so that they can meet their financial requirements which arise from time to time. By being critical thinkers, they become self-sufficient and would meet all future expenses that may come up. And the benefit of getting a company registered as Nidhi doesn’t end there.
There are many more advantages to forming a Nidhi Company. Some are listed below:
Liability is Limited: Liability of Directors and shareholders of the Nidhi Company is limited. In case the company suffers from any loss and faces, financial distress in the course of it’s business activity, the personal assets of any of the Directors or members are not at risk of being seized by banks, creditors, and government.
Less Regulations: “Nidhi” companies are governed under the Nidhi Rules, 2014. The Central Government is the regulating authority, which controls it’s activities and operations. Guidelines imposed by the RBI on “Nidhis” are very few.
Better Credibility: “Nidhi” companies enjoy better credibility as opposed to any other member-based organizations like Trusts, Cooperative Societies or NGOs.
Better Option for Savings : The main purpose of a Nidhi Company’s incorporation is to encourage the habit of saving among the members of the Company. This is how it achieves the other goal of it’s registration of being mutually beneficial. The Nidhi Companies are to “lend and borrow money” to and from it’s shareholders/members only.
Easy Access of Public Funds: The loans from the Nidhi Company come at a cheaper rate than loans from banks and other NBFCs, for it’s shareholders. And the process of obtaining the loan and customized services are much more convenient and quicker.
Ease of Fund: Nidhi Company is the safest and the cheapest way of inviting deposits from the general public. You just need to take them as registered members.
Micro Banking: Nidhis provide banking services to the remote and rural public of India which still is based in far-off locations and is, hence, devoid of accessing finance from national banks and NBFCs.
It acts as a “Better Credit Co-operative Society”: Nidhi Company is a close substitute for credit co-operative society. And, therefore, more preferred by the small financer. Once a Nidhi company has been registered, the members can avail of all the benefit’s of a credit co-operative society.
Simple Processing: Borrowing and lending to known persons, belonging to the same group, is much less complicated than dealing with banks, where the procedure is impersonal and fixed.
Easy Registration Process: The process to register a “Nidhi Company” with LegalRaasta is quite simple and transparent. You don’t need to take any license from RBI. You just have to incorporate your company as a public limited one with the MCA.
Single Regulatory Body: After the Amendment in Companies act 2013, Nidhi Companies are overseen by Nidhi Company Rules.
Low Capital Requirement: Ministry of Corporate Affairs (MCA) commands the minimum capital requirement of Rs.5 lakhs for the incorporation of a “Nidhi”. And, within 1-year, the capital has to be raised to at least Rs.10 lakhs. The Fees, DIN, DSC & Other Expenses are approx. Rs.25-30,000. These include Government fees that differ from State to State.
Fulfilling the needs of Lower & Middle-income groups: Nidhi Companies play an important role in meeting the needs of lower and middle-income groups by providing them financial help without complex formalities and documentation.
Easier Eligible: People getting minimum wages and belonging to lower strata are usually unable to take loans from traditional banks because of their high eligibility criteria. For them, Nidhi Company is a good option to obtain finance because of fewer conditions.
No External Involvement: Nidhi Companies take funds from their members and further provides loans to their members only. All transactions are done within this group only. So, no external factors are affecting the working of these companies. The investors/members themselves oversee the operations of the company.
Separate Entity: Nidhi Company is a separate legal entity that can acquire assets and incur debts in it’s own name.
Requirements for a “Nidhi Company Incorporation”
Given below are the essential conditions that must be met with for registering or operating a Nidhi Company.
Procedure for Nidhi Company Registration
Though the process of registering a Nidhi Company is simple, still, assistance from a professional is advised for the completion of various complex forms and filing them within time. Moreover, the government portals and language are a bit on the difficult side, too.
And LegalRaasta is an expert in Nidhi Company Incorporations, with over 7 years of experience in the field and has successfully registered more than 500 Nidhi Companies. Our operations are spread all over India.
Why Choose LegalRaasta
Get the edge over others with a highly qualified team of professionals at LegalRaasta. And get highly ranked professional services with full customer satisfaction. We assist with each step of a Nidhi company registration so that you can concentrate on your business.
We get companies registered anywhere in India
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Passport Sized photographs of all the directors.
ID proof of all the designated directors and shareholders. (PAN card and Passport are valid).
Address proof of all the directors and members (Ration Card, Aadhaar Card, Passport, Voter ID, and Utility Bill – electricity/water/mobile).
Address Proof of the Company. Make sure that the address proof is not older than 2 months.
Copy of the Property papers (if the property is owned).
NOC (No-Objection-Certificate) from the owner (if the property is rented).
Compliances for Nidhi Company
NDH-1 Form: A Nidhi Company has to submit the list of members within 90 days at the end of every financial year, in this Form.
NDH-2 Form: It can request MCA for an extension in this Form, in case it has not been able to add 200 members in it’s first financial year.
NDH-3 Form: Other than the above NDH-1 Form, a half-yearly return is also required to be filed in NDH-3 Form.
Annual Returns with ROC: The Nidhi Company has to file it’s Annual Returns with MCA through Form MGT-7.
Profit & Loss Statement and Balance sheet: The financial statements and other related documents are to be submitted, annually, in Form AOC-4.
Income Tax Returns: Nidhi Company, like all other businesses, must file it’s Annual Income Tax Returns by 30th September of the following financial year.
Deposits & Loans
Here we understand the rules and regulations which govern “the loan and deposit” aspects under Nidhi Company.
Restrictions on Nidhi Company
Though the sole purpose of Nidhi companies is taking up non-banking financial activities, they are prohibited to perform those transactions that may involve external factors, such as:
- Advertise themselves to invite deposits,
- Chit funds,
- Leasing Finance,
- Hire-Purchase finances,
- Sell, pledge or mortgage the assets kept with it as security for a loan,
- Getting into a partnership for carrying out lending and borrowing activities,
- Taking deposits or lending funds to someone other than its shareholders,
- Issue preference shares, debentures or any other debt instruments,
- Issue equity shares of the nominal value of over Rs. 10/- each,
- Provide it’s deposit holders equity shares which are more than 10 in number and the value of the shares must be more than Rs.100/-,
- Open a current account with it’s members (though it is allowed to open a Savings Account),
- Lend to or take a deposit from a corporate,
- Pay commission, fee or incentive for mobilizing deposits,
- Carry on any other business than borrowing and lending to its members,
- Hire a Purchase Financer,
- Pay any brokerage for granting a loan to its members.
What is included in Our Nidhi Company Registration Package
Frequently Asked Questions
2. Search a unique name in 3 options and get approved by ROC for 1,
3. Submit of MoA & AoA,
4. Certificate of Incorporation & CIN,
5. Take PAN, TAN & Bank Account.
• Passport size photograph of Directors,
• Copy of address proof of Director,
• Copy of address proof of company. Property proof (If owned property), Rent agreement (in case of rented property), electricity/water bill, etc. are valid,
• Landlord NOC (in case of rented property).
And it should end with Nidhi Limited.
2. Is over 18 years of age.
1. Register at least 200 members.
2. Maintain minimum net owned funds (NOF) of Rs. 10 Lakh.
3. Maintain NOF to deposit ratio of 1:20.
4. Of all the outstanding deposits, at least 10% must be unencumbered term deposits.
You just need:
1. Rent agreement along with the latest rent receipt (if the place is rented).
2. NOC from the Owner.
3. House tax receipts (if the premises are owned)
4. Electricity bill
• A Nidhi Company cannot issue preference shares, debentures or any other such instrument.
• It cannot accept deposits nor lend money, other than it’s members.
• These companies cannot pay any incentive for mobilizing deposits.
DIN or “Director Identification Number” is given to an existing Director or potential Director of any Company which is incorporated or is to be incorporated. It is a Unique Identification Number, issued by the MCA.
NOF or Net Owned Fund = Paid up share capital + Free Reserves – Accumulated losses, deferred revenue expenditure, and other intangible assets.
2. The time duration for”Fixed Deposits” is a minimum of 6 months to a maximum of 60 months.
3. For Recurring Deposits, it is a minimum of 12 months to a maximum of 60 months.
4. A Nidhi Company can invest and keep investing, in unencumbered term deposits with a scheduled commercial bank (other than a co-operative bank or a regional rural bank), or in post office deposits, in it’s own name, and the amount must not be less than 10% of the deposits outstanding at the close of business on the last working day of the second preceding month. In some emergency, the limit of 10% can be reduced only after seeking approval of the Regional Director.
LegalRaasta provides Nidhi Company incorporation services across India in all cities. We have done Nidhi company registration in Mumbai, Delhi, Gurgaon, Noida, Bangalore, Chennai, Hyderabad, Ahmedabad, Kolkata, Surat, Pune, Jaipur, Lucknow, Kanpur, Nagpur and other Indian cities.
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Updates as on March 21, 2020
- March 21, 2020, To enhance transparency and investor-friendliness, Nidhi companies are now instructed to follow the time frame for applying in Form NDH-4. In case of non-compliance, a Nidhi Company will not be allowed to file Form No SH-7 and Form PAS-3
- March 17, 2020, To protect the interest of investors, the Ministry has advised them to verify a Nidhi Company status before pumping in money. They can verify it from the notification in the official gazette.