First of all, know the meaning of word Nidhi. As per section 406 of companies act 2013 Nidhi means 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 benefits.
Nidhi companies are allowed to borrow from its members and lend to its members. Therefore, the funds contributed for a Nidhi company are only from its members (shareholders). Nidhi Companies are registered Limited Companies involved in taking deposits and lending to its members. The activity of a Nidhi Company does fall under the purview of Reserve Bank of India, as it is similar to an NBFC. However, as Nidhi Companies only deal with shareholder-members money, RBI has exempted Nidhi Companies from the core provisions of the RBI and other regulations applicable to an NBFC.
A Nidhi to be incorporated under the Companies Act, 2013 shall be a public company and shall have a minimum paid up equity share capital of five lakh rupees. Nidhi Company shall not issue preference shares. 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 Company incorporated as a Nidhi shall have the last words Nidhi Limited as part of its name.
Benefits of Nidhi company are:
Limited RBI Regulations: Owing to their non-dealing with the funds of any person other than their members, the regulations imposed upon the Nidhis by RBI is limited. These companies follow the Nidhi Rules, 2014 issued by the center in respect of the activities and workings of Nidhi Companies.
Limited Capital Requirement: The Ministry of Corporate Affairs has done away with the minimum capital requirement of INR 5 Lakhs for Nidhis. It is only after Nidhi Rules, 2014, that mandated the infusion of INR 10 lakhs for such companies.
Ease of formation: Unlike other NBFCs, Nidhis donot have to obtain a license from RBI. They just have to incorporate themselves as a public company with the MCA, infuse the required amount of capital as per Nidhi Rules, 2014 and they are all set to go.
Help in channelizing small savings: The main aim of such companies is to promote the habit of saving and thrifts among lower and middle section of the society. These small sections of the population contribute to the funds of and avail credit from Nidhi companies.
Lower rate of credit: The loans given to the members are at a lower rate of interest than the market rate. This brings greater savings to the members.
No outsider intervention: The Nidhi companies are formed by, managed by, and provide benefits to their members only. The outsider is not allowed to intervene into the working of the Nidhis, neither allowed to deposit money or avail credit from these companies.
A Nidhi company shall not,
1. Carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate.
2. Issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever.
3. Open any current account with its members.
4. Carry on any business other than the business of borrowing or lending in its own name.
5. Accept deposits from or lend to any person, other than its members.
6. Pledge any of the assets lodged by its members as security.
7. Take deposits from or lend money to any body corporate.
8. Enter into any partnership arrangement in its borrowing or lending activities.
9. Issue or cause to be issued any advertisement in any form for soliciting deposit.
10. Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or for granting loans.
Obtain DSC & DIN
Digital Signature Certificate (DSC) and Director Identification Number (DIN) are required for the proposed Directors of the Nidhi Company. DIN and DSC can be obtained for the proposed Directors within 5 to 7 days.
Name Approval & License
Once DIN and DSC are available for at least three Directors, application for reservation of name for Nidhi Company can be made to MCA. Name approval can be obtained in 3 to 5 working days.
Nidhi Company Registration
Once the name approval is obtained, registration documents can be submitted to the MCA along with an application for registration. MCA will usually approve the application for incorporation in 5 to 7 days, subject to their processing time.
For Directors and Shareholders (In Scan only):
Identity Proof - Anyone (Election ID/Passport/Driving License/Aadhar Card)
Address Proof - Anyone and Latest by One Month (Bank Statement/Mobile Bill/Telephone Bill/Electricity Bill)
Note: Aadhar Card/DL/Passport/Voter-ID will not be accepted as Address proof.
For Registered Office (In Scan only):
In case the premises are Rented Rent agreement (Notarized) + Latest Electricity bill + NOC from the Owner in the name of any Director.
In case the premises are owned by any Director or any Relative Registry Proof or House tax receipts + Latest Electricity bill + NOC from the Owner in the name of any Director.