With the introduction of Nidhi Company a person can start banking business for a relatively small number of people without going through strict formalities required for incorporation of Non-Banking Financial Company (NBFC) or a Banking company.
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Nidhi company registration?
Nidhi companies are formed under the company’s act, 2013 whose primary objective is to accept deposits and lending money to its members only, against mortgage of jewels, gold, property etc. For over centuries local affluent persons like lawyers, auditors, and retired persons have been doing business of lending and accepting deposits in their local area for cultivating the habit of thrift but the area of operation has been limited to local panchayats and municipalities only. With the introduction of Nidhi Company a person can start banking business for a relatively small number of people without going through strict formalities required for incorporation of Non-Banking Financial Company (NBFC) or a Banking company.
NIDHI companies are effectively non-banking financial companies and are engaged in the business of accepting deposits and making loans to their members. The recent failures in the NBFC sector also extended to the NIDHI companies compelling the Government to introduce strict prudential norms for such companies. The deposit-taking activities of NIDHIs are governed by the RBI Act and guidelines made thereunder.
What are the requirements for incorporating a NIDHI company in INDIA?
A Nidhi Company shall have a minimum capital of five lakh rupees.
It cannot issue preference shares.
A minimum of seven shareholders and three directors are required for incorporating a Nidhi company.
No Nidhi shall have any object in its Memorandum of Association 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.
Every Nidhi company shall have 'Nidhi Limited' as a part of its name.
Every Nidhi company shall ensure that within one year of its incorporation it has-
At least two hundred members.
Net owned funds of ten lacs or more.
Unencumbered term deposits of not less than ten per cent of the outstanding deposits.
The ratio of Net owned funds to deposits of more than 1:20.
What is the NIDHI company registration process?
For incorporation, the normal procedure for incorporating a public company is required to be complied with, such as obtaining availability of name, filing of Memorandum and Articles of Association and other related documents. For details on registration click here.
What are the advantages of incorporating a Nidhi company?
A Nidhi mobilises small savings, mostly of the middle class and disburses loans to eligible borrowers. Owing to their small size and closeness to the customers, disbursement of loans is speedy. This is especially useful in case the borrower is in urgent needs of funds
The repayment is guaranteed, as the loans are secured and due to peer pressure, borrowers ensure that loan is repaid on due dates.
Nidhis offer a higher rate of interest on deposits. This makes it an attractive investment opportunity for people, especially senior citizens.
The Board of Directors of a Nidhi normally consists of senior persons who have experience in handling finances and who are well respected in social circles. This lends credibility to the institution and instils confidence in the minds of borrowers and depositors.
What are the general restrictions or prohibitions for Nidhi company?
A Nidhi company shall not
carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate;
issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever;
open any current account with its members;
acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi;
carry on any business other than the business of borrowing or lending in its own name. Nidhis which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding twenty per cent of the gross income of the Nidhi at any point of time during a financial year.
accept deposits from or lend to any person, other than its members;
pledge any of the assets lodged by its members as security;
take deposits from or lend money to any body corporate;
enter into any partnership arrangement in its borrowing or lending activities;
issue or cause to be issued any advertisement in any form for soliciting deposit. It may be noted that private circulation of the details of fixed deposit Schemes among the members of the Nidhi carrying the words "for private circulation to members only" shall not be considered to be an advertisement for soliciting deposits.
pay any brokerage or incentive for mobilizing deposits from members or for the deployment of funds or for granting loans.
Can Nidhi Company have branches?
A Nidhi company can open up to 3 branches within the same district subject to it has earned profits during the preceding three financial years.
If a Nidhi proposes to open more than three branches within a district or any branch outside the district it shall obtain a previous approval of Regional Director.
A Nidhi cannot open any branch outside the state.
A Nidhi cannot close any of its branches without giving an advertisement in the local newspaper and informing the Registrar for the same.
How can a Nidhi Company accept deposits from its members?
A Nidhi company shall accept fixed deposits for not less than a period of six months and a maximum period of sixty months.
Recurring deposits can be accepted for a minimum period of 12 months and a maximum period of sixty months.
The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed one lakh rupees at any point of time and the rate of interest shall not exceed two per cent above the rate of interest payable on the savings bank account by nationalised banks.
A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding the maximum rate of interest prescribed by the Reserve Bank of India which the Non-Banking Financial Companies can pay on their public deposits.
How can a Nidhi company give loan to its members?
The loans given by a Nidhi to a member shall be subject to the following limits, namely:–
two lakh rupees, where the total amount of deposits of such Nidhi from its members is less than two crore rupees;
seven lakh fifty thousand rupees, where the total amount of deposits of such Nidhi from its members is more than two crore rupees but less than twenty crore rupees;
twelve lakh rupees, where the total amount of deposits of such Nidhi from its members is more than twenty crore rupees but less than fifty crore rupees; and
fifteen lakh rupees, where the total amount of deposits of such Nidhi from its members is more than fifty crore rupees:
How can a member take a loan from a Nidhi company?
A Nidhi shall give loans to its members only against the following securities, namely:–
gold, silver and jewellery, and the repayment period of such loan shall not exceed one year.
immovable property and, the total loans against immovable property [excluding mortgage loans granted on the security of the property by a registered mortgage, being a registered mortgage under section 69 of the Transfer of Property Act, 1882 (IV of 1882)] shall not exceed fifty per cent of the overall loan outstanding on the date of approval by the board, the individual loan shall not exceed fifty per cent of the value of the property offered as security and the period of repayment of such loan shall not exceed seven years.
fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies.
What are the rates of interest charged by a Nidhi company?
The rate of interest to be charged on any loan given by a Nidhi shall not exceed seven and half per cent above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method.
Nidhi shall charge the same rate of interest on the borrowers in respect of the same class of loans and the rates of interest of all classes of loans shall be prominently displayed on the notice board at the registered office and each branch office of Nidhi.
What's in it for you?
Our package includes-
Seven class-3 Digital signatures(Signing).
Five Director identification numbers.
One RUN approval(Name approval).
Incorporation fees and stamp duty.
PAN and Tan
Memorandum of association.
Articles of association
Free GST registration
After incorporation also, we will assist in further activities like
Free consultation and meetings for understanding the scope of work.
Updates on various regulations and compliances.
Assisting in opening a current account.
A dedicated manager for clearing your doubts.
We value all our customers and attempt to offer our services as though they were our 'first client'. We ensure that the process is fast and smooth. Unlike others, we do not outsource our work and offer in house services coming through our specialists who are experts in their respective fields. We will assign you a dedicated manager who will support you from the start to end of the process and address any queries that you might have.