The Nidhi company is a corporation that was established in accordance with the Companies Act of 2013 with the primary goal of encouraging its members to save and practice thrift. 

Recently, the Central Government changed the rules pertaining to Nidhi company in India in order to accomplish the objectives of transparency and investor friendliness in the country’s business climate.

About Nidhi company

Nidhi company meaning

You must be wondering what is Nidhi Company full form. The full form of NIDHI is National Initiative for Developing and Harnessing Innovations. Nidhi companies are regulated by the Companies Act of 2013.

What is Nidhi company?

An exclusive NBFC governed by the Nidhi Rules of 2014 and the Companies Act of 2013 is known as a Nidhi finance company. Nidhi companies signify that by taking deposits and offering loans, these businesses encourage their members to save and be frugal. 

They operate in a specific geographic area and serve their local communities as their primary clientele. It was established to lend and borrow funds among its members. It operates on the tenet of mutual benefit and instils in its members the habit of saving. 

Usually, these businesses are located in the southern region of the nation. Nidhi Company is simple to start because it is not required to obtain a license from the Reserve Bank of India (RBI).

Top 10 Nidhi Companies in India

Following is a Nidhi company list of the top 10 companies in India:

1. Adambakkam Janopakara Saswatha Nidhi Limited

2. KPB Nidhi Limited

3. Jayant India Nidhi Limited

4. Jbsublet India Nidhi Limited

5. Mahamudra Global Nidhi Limited

6. Samartha Nidhi Limited

7. Varanasi Nidhi Limited

8. Reeti India Nidhi Limited

9. People’s Urban Nidhi Limited

10. Thrissur Nidhi Limited

Procedure for Nidhi Finance Company Registration

Nidhi company members must register through the following steps:

Digital Signature Certificate (DSC) and Director Identification Number (DIN)

 A DIN is required for each proposed director. A DSC is also required for online filing for at least one director.

Approval of Name 

Using the Reserve Unique Name (RUN) service offered by the Ministry of Corporate Affairs (MCA), select a distinctive and available company name.

The Articles of Association (AoA) and the Memorandum of Association (MoA) 

Create these documents that describe the goals of the organization and the guidelines for internal governance.

Filling Out SPICe+ Forms 

Using the MCA portal, electronically submit the SPICe+ form. This form combines many DIN, PAN, TAN, and company incorporation applications.

Getting a TAN and PAN 

Apply for the company’s Tax Deduction and Collection Account Number (TAN) and Permanent Account Number (PAN).

Start of Business Certificate (CBC) 

The MCA will grant a CBC to the company after a successful registration, allowing it to start doing business.

Limitations Applying to Nidhi Company

A Nidhi Company is regulated by few limitations and restrictions. A Nidhi Company in India is not allowed to:

1. Manage the hiring, purchasing, leasing, insurance, and securities acquisition processes for any corporate entity.
2. Issue shares of preference or debt securities.
3. Open a current account for any of the involved parties.
4. Take up any activity that does not include the name-giving activities of loan and borrowing.
5. Take deposits from and lend to anybody besides its members.
6. Accept deposits from businesses and provide them with credit.
7. Enter into any kind of lending or borrowing arrangement through cooperation.
8. Distribute an advertisement requesting the deposit.
9. Reward members with commissions or incentives in exchange for their loan approvals or member deposits.
10. Charge a fee for issuing shares or limit the number of shares that can be issued to 10 per depositor.
11. Give loans to members who are above the cap by the 2014 Nidhi rules.
12. Interest rates above 7.5 per cent.
13. Not announce a dividend of more than 25%.

Nidhi Company Plan for Establishment

Necessary conditions to establish a Nidhi Company

The following Nidhi company rules must be complied with to establish or organize a Nidhi Company:

1. The registration process for a Nidhi firm is simpler and less complicated than those of other financial companies, such as NBFC, which require an RBI licence in order to operate.
2. It should be a public company with a minimum paid-up capital of Rs. 5 lacs.
3. Will not be issuing shares with preference.
4. Shall have “Nidhi Limited” as the last word in its name.
5. Three directors, at the very least, must be members of the Nidhi Company.
6. Must have seven shareholders.

Documents needed to be registered

1. Evidence of the business’s registered address (rent or lease agreement, ownership paperwork)
2. Certificate of No Objection (signed by the landlord or owner)
3. Identity verification
4. Address the members’ proofs.
5. Members’ pictures and copies of their PAN cards
6. Digital Signature (DSC)
7. The directors’ Director Identification Number (DIN)
8. The company’s Memorandum of Association (MoA)
9. The company’s articles of association (AoA)

Nidhi Company’s compliance checklist

Every Nidhi Limited Company needs to complete a crucial checklist for compliance requirements promptly.

The annual nidhi company compliances checklist:

1. Form NDH 1 
2. Form NDH 2 
3. Form NDH 3 
4. Form NDH 4 
5. Form NDH 5 
6. Central Government Nidhi Declaration
7. ADT Form 1
8. Maintaining the Book of Accounts
9. Safeguarding the Statutory Registry
10. Statements of finances
11. Report of the Director
12. Meetings Required by Statute
13. Annual Income Tax Return Filing
14. Form MGT 7 Form AOC 4

The Event-based Compliance of a Nidhi Company Checklist:

1. Rebranding of the business
2. Modification of the Registered Office’s address
3. Any Director appointment or resignation Any Auditor appointment or resignation
4. Modifications to the Company’s Objectives (MOA)
5. Exchange of shares
6. Modification of the capital structure
7. An increase in the amount of authorized capital
8. KMP (Key Managerial Personnel) Appointment

Penalties for failing to comply

The Nidhi ltd Company is accountable for the following when it doesn’t follow the requirements outlined in the Companies Act or the Nidhi Company Rules:

1. Rs.5000, along with additional officers, in the event of default or non-payment.
2. And after that, for Rs. 50 every day as long as the default remains.

Benefits of Nidhi Company

No Need for an RBI License

A Nidhi Company does not need to apply for an RBI license, unlike other NBFCs. Furthermore, Nidhi corporations are subject to MCA regulation, which means that their registration procedure is straightforward and just a few documents are needed. 

Members’ Mutual Gains

The goal of a Nidhi ltd Company is to serve its members’ interests. It gives members a simple option to deposit whatever extra money they have with the business. Additionally, it lends money to its members when they need it. Additionally, the quick loan payout process is a result of the tight relationship between the organization and its members. 

Minimal Need for Capital

Ten lakhs rupees is the paid-up share capital required to start a Nidhi Limited Company. However, in order to register, other NBFCs want a minimum of Rs. 2 crores in net owned money. Thus, a Nidhi Company was started with only a small amount of capital. 

No upper bound on the total number of members

A public business may have an unlimited number of members. A Nidhi business may have as many members as its share capital will allow, as it must be incorporated as a public business. 

Advances Made in Place of Security

Only assets like gold, silver, jewellery, fixed deposits, real estate, National Savings Certificates, insurance policies, etc., are acceptable collateral for loans from Nidhi Companies. As a result, the business is protected from any default on loan repayment. 

Expert Administration

Nidhi companies are typically run by finance professionals or other well-known individuals with experience in the financial industry. As a result, the business is run professionally, which further enhances its trustworthiness. 

Reduced Risk

A Nidhi Finance Company primarily works with its members; external parties are not as involved as they could be, and their actions could impact the company’s operations. Consequently, there is less risk associated with these businesses. 

Nidhi Companies are eligible for Simplified Compliance Relaxation under a number of the Companies Act 2013’s requirements, including dividend declaration, loans to directors, and private placement. Furthermore, Nidhi Rules 2014 are less strict, which makes it easier for Nidhi Companies to comply.  

Contact us to know more about Nidhi company registration fees and Nidhi company rules.

FAQs

What is the difference between chit fund and nidhi company?

A Chit Fund is a committee similar to a Nidhi Company, but it only accepts payments from its members paid in installments over a predetermined length of time. An NBFC, on the other hand, is limited to lending money or accepting deposits. Between the two, this is the primary difference.

What is the Nidhi company loan limit?

₹2 Lakh in the event that Nidhi’s total deposit balance is less than ₹ 2 crore. If the members’ total deposits exceed ₹2 crore but fall short of ₹20 crore, the amount will be seven hundred fifty thousand rupees. ₹12 lakhs in the event that the aggregate deposits made by its constituents surpass ₹20 crore but fall short of ₹50 crore.

Is there GST on Nidhi companies?

Businesses whose total revenue exceeds the specified threshold or those who provide products or services between states must register for GST. Therefore, each business must determine if it meets the requirements of the GST rules, including qualifying for the prescribed turnover limit and/or supplying goods to multiple states.

Is Nidhi company profitable?

Mutual benefit organizations known as nidhi firms were created with the express purpose of promoting lending and saving among their members. Nidhi firms are an excellent investment opportunity for astute businesspeople, since they come with flexible operations, relatively easy registration requirements, and perks like tax incentives.