Nidhi Company Registration
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Nidhi Company Registration in India

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About

Nidhi Company Registration

  • Nidhi is a company formed to cultivate the habit of saving and drifting and the mutual benefit of the members by lending and borrowing between the members of the company. Nidhi is a non-banking financial company (NBFC) that is regulated from time to time by Indian Reserve Bank. However, RBI has excluded Nidhi companies from the basic provisions of the RBI Act.
  • Nidhi Company governed in India by Companies Act 2013, and define under section 403, and is belongs to the non banking Indian finance sector. Nidhi Companies are regulated by Ministry Of Corporate Affairs (MCA).
  • The feature that distinguishes Nidhi Company from other companies / NBFCs, etc., is that Nidhi only deals with deposits and loans to its members (shareholders) and works for the mutual benefit of its members. As a result, certain exemptions have been granted to these companies with regard to annual compliance and taxation.
  • The loans given to the members are at a lower rate of interest than the market rate. This brings greater savings to the members.
  • Nidhi Company is a class of NBFCs. Although not directly regulated by the RBI, RBI still has the power to issue directives on their deposit acceptance activities.

ELIGIBILITY/REQUIREMENT FOR NIDHI COMPANY:

  • Minimum 3 Directors.
  • Minimum 7 shareholders.
  • Minimum paid up equity share capital of Rs.5,00,000/-
  • Atleast one Director should be an Indian Resident.
  • The Name Should end as “Nidhi Limited”

Key Points:

1.       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.

2.       It cannot accept deposits from or give loans to some external individual or corporation.

3.       A Nidhi Company is not empowered to issue preference shares, debentures, or some other debt instruments in any form.

4.       Companies Act 2013 and Nidhi Rules 2014 are the governing bodies regulating the functions and operations of Nidhi Company in India.

5.       Nidhi Company does not come under the purview of RBI. Therefore, Nidhi does not need any license from RBI to operate a loan business.

6.       It is not entitled to perform vehicle finance business or microfinance business in India.

7.       Within 12 months of registration, the number of members must be at least 200.

8.       A maximum interest rate of 20% p.a. (calculated by the reducing balance method) can be charged.

9.       The maximum rate of interest that can be offered on saving deposit account shall not exceed 2% above the rate offered by Nationalised Banks.

10.    Nidhi Company can accept FD, RD & savings and can earn an interest of 12.5% currently.

11.    Rate of Interest that can be offered on Fixed and Recurring Deposit shall not exceed the maximum rate of interest prescribed by RBI for the NBFCs to offer on their deposits. The maximum limit of the rate of interest for NBFCs is also applicable to the Nidhi companies.

12.    Operations limited to 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.

13.    It can only give loans against security. These securities may be Gold, Property, Fixed Deposits, Government Securities or Life Insurance Certificates.

14.    Unencumbered deposits (Deposits not offered as securities for any purpose) should not be less than 10 % of outstanding deposits.

15.    Filing of Annual Accounts, Audit, and Tax Returns, in the proper format, is compulsory

Document Required

DOCUMENTS REQUIRED FOR NIDHI COMPANY IN INDIA :

  1. Proof of identity of all the shareholders and directors ie. (Passport/DL/Aadhar Card/Voter Id) 
  2. Proof of address of all the directors and the shareholders Bank Account Statement/Electricity Bill/Mobile Bill
  3. PAN Card of all the shareholders and directors
  4. Utility Bill of the proposed office i.e. proposed registered office for the company
  5. NOC (No Objection Certificate) from the landlord where the office of the company will be situated
  6. Duly signed DSC Form of the all directors of the proposed company.

 

INFORMATION REQUIRED FOR NIDHI COMPANY IN INDIA 

Directors Detail:

1.      Educational Qualification of all the Directors.

2.      Profession/Occupation of all the directors with area of Operation

3.      Citizenship alongwith Residential Status of all the Directors

4.      Place of Birth of all the Directors

5.      Permanent & Present Residential Status of all the Directors

6.      Contact Numbers of all the Directors

7.      Email Ids of all the Directors

 

 

 Company Detail

  1. Preference wise Proposed names of the Company 
  2. with Significance of the name 
  3. State in which Company is to be registered.
  4. Authorized and Paid Up capital of the Proposed Company
  5. Main Object of the Proposed Company
  6. Division of paid Up capital among the Subscribers.
  7. Number of Proposed Directors
  8. Number of Proposed Shareholders
  9. Name of the bank in which Company bank Account will be preferred.
  10. Email id of The Company.

What You Get

Basic:

  1. Director Identification Number (DIN) for life time of all directors.
  2. Digital Signature Certificates (DSC) of all the directors & subscribers.
  3. Reservation the name for your Company.
  4. Certificate of Incorporation
  5. PAN Card of the Company
  6. TAN No of the Company
  7. Bank Account With Desired bank
  8. ESI and EPF No.
  9. Share Certificates
  10. Proper Incorporation File
  11.  Bank account opening documents
  12. Draft Copies of MOA & AOA.
  13. GST Registration

Advantage

ADVANTAGES OF NIDHI COMPANY IN INDIA

  1. Cost efficient registration-Registering Nidhi Company comes at a pocket-friendly cost. The minimum capital requirement for registration of the Nidhi Company is Rs 5, 00, 000 lakh where you have the opportunity to invest the capital within 2 months of registration.
  2. Regulator: Companies Act 2013 & Nidhi Rules 2014 Regulates the function and operations of Nidhi Company in India. 
  3. No Approval from RBI: Nidhi Company is outside the preview of Reserve Bank of India. It does not require a license from RBI to operate a loan business in India.
  • No outsider intervention: The Nidhi Companies are formed, managed and provides benefits only to their members. The outsider will not be allowed to intervene in Nidhi on any ways. Be it working of the Nidhi companies or depositing money with them or even avail credit from Nidhi. There would be no external intervention in the management as well.
  1. Less level of Risk – non- payment loans- It is very clear that Nidhi Company can accept deposits and grant loans to its members only in accordance with the Nidhi Rules of 2014, which means that the risk of non-repayment of loans is less than that of other finance companies. It is the safest route for lending loans, and the loans granted to members are at a much lower rate than others, which again brings greater savings among members.
  2. Benefits to the members: Nidhi Company works with the objective of increasing savings of its members.
  • It is very easy to make donations and get loans from the company for its members
  • The loans given to the members at a lower rate compared to the market rate hence it attracts the members to do more savings.
  • The net owned fund ratio of Nidhi Company is 1:20. That means you invest 1 rupee and you will get a deposit of 20 rupees
  • The investments in the Nihi Company are secured ones. The risk of non payment of loans is less as compared to other finance businesses.

COMPLIANCES OF NIDHI COMPANY IN INDIA :

Once the Nidhi Company is incorporated it must fulfill the following requirements:

  • It must have at least 200 members/shareholders.
  • Minimum Net Owned Fund should be Rs. 10 Lakhs.
  • Unencumbered term deposit must be at least 10% of the term deposit.
  • The ratio of Net Owned Fund to term deposit should not be less than 1:20.

Time Duration

20-30 days

HOW IT WORKS

 

How it works
Basic

Basic

Ezzus India India

Rs.65000/-
Rs.58000/-
Rs.62140/- Including GST

Nidhi Company Registration including 3 DIN + 7 DSC of Shareholders + Certificate of Incorporation + MoA/AoA + 1 Lakh Authorised Capital + PAN + TAN.

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Faq's

1. What is Nidhi company?

  • Nidhi's literal meaning is 'fund,' 'finance or treasury'
  • Nidhi Company is incorporated with the aim of developing the habit of drifting and saving and reserving funds among its members and
  • also receiving deposits and loans from and to its members only for their mutual benefit.
  • Although there are no separate registrations for a Nidhi company under RBI,
  • RBI has the power to issue directives to them.
  • Nidhi Companies are exempt from the main provisions otherwise applicable to NBFCs in India.
  • It requires a minimum of 7 members and 3 directors to begin with.
  • All such companies must apply the name of "Nidhi Limited."
  • Within a period of one year from the beginning, every nidhi company must ensure that it has no less than 200 members.

2. What are The Annual Mandatory Compliance for Nidhi Companies?

Nidhi Companies has to mandatory file some extra forms compared to other Private or Public Companies.

  • NDH 1- The Nidhi Company is required to submit the list of members within 90 days from the end of every financial year.
  • NDH 2-The Company can request MCA for the extension in case Nidhi Company is not able to add 200 members in a year.
  • NDH 3-Along with the above form a half yearly return is also required to be filed in Form NDH 3.
  • ROC Annual Returns-It is mandatory for a Nidhi Company to file annual return with MCA through Form MGT-7.
  • Profit Loss and Balance sheet-The financial statements and other related documents are required to be submitted in Form AOC-4.
  • Income tax Returns-Nidhi Company is required to file annual returns by 30th September of the following financial year.

3. How is the registration of Nidhi Company different from the registration of other NBFCs?

Both of these entities are different at different levels. Nidhi is not regulated by RBI and Nidhi Company Registration requires a much smaller amount of capital than Rs. 2 Crore paid-up capital requirements for NBFCs.

4. What are Limitations or Restrictions on Nidhi Companies?

The following are some of the restrictions a Nidhi Company is subject to under Nidhi Rules, 2014. As per Rule 6 of Nidhi Rules, 2014, 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. 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;
  5. carry on any business other than the business of borrowing or lending in its own name: Provided that 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.
  6. Accept deposits from or lend to any person, other than its members;
  7. Pledge any of the assets lodged by its members as security;
  8. Take deposits from or lend money to any body corporate;
  9. Enter into any partnership arrangement in its borrowing or lending activities;
  10. Issue or cause to be issued any advertisement in any form for soliciting deposit: Provided 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.
  11. Pay any brokerage or incentive for mobilising deposits from members or for deployment of funds or for granting loans.

 

5Is there any limitation on the maximum number of members of the Nidhi Limited?

No, the Nidhi company can have as many members as possible. However, a minimum number of 200 members will be reached within the first financial year.

6Can Nidhi Company indulge in any activity other than lending and borrowing?

Nidhi Companies are not authorized to conduct any business of any kind other than lending and borrowing on their own behalf.

7Can a member who has previously defaulted on a loan from Nidhi be able to borrow from Nidhi again?

No. A member who has previously defaulted on a loan from Nidhi can not borrow from Nidhi again.

8. What kind of loans can not be issued by the Nidhi Company?

The following type of loans may not be granted to Nidhi Company:

1. Personal Loans

2. Financing of assets / vehicle

3. Microfinance

4. Rental-purchase

9. Can the Nidhi Company provide a microfinance business?

No, Nidhi Company is not allowed to conduct microfinance business in India. This is because microfinance is a completely different set of business for the NBFC and requires more capital to do the same. As a result, Nidhi Company can not engage in microfinance business. Furthermore, since Nidhi Company raises funds from deposits and therefore, if it passes the same to a member without any security, there will be a high risk of default on the customer, which will ultimately result in the Nidhi Company going bankrupt.

10.What is the maximum qualifying balance for interest calculation in the savings deposit account?

The maximum balance on the savings deposit account at any time eligible for interest shall not exceed one lakh rupee and the interest rate on such deposits shall not exceed two per cent above the interest rate payable on the savings bank account by the nationalized banks.

11Is there any restriction on the opening of the Nidhi Company's branches?

Yes, yes. It can not open another branch until it has earned net profit after tax consecutively for three straight years after the successful registration of the Nidhi Company.

After three years of continuous business profit, the Nidhi Company can open up to three branches. Furthermore, these three branches can only be opened within the district. You will also require permission from the Regional Director (RD) to open any branch outside the district.

Nor can the Nidhi Company open a branch outside the state.

12. What is the maximum amount of deposits that Nidhi Company can take?

The Nidhi Company may take up a maximum of 20 times the net-owned fund. Net-owned fund means the total fund invested by the owner less any accumulated loss. For example, if you have invested Rs.1 crore, you are entitled to raise money to Rs.20 Crore.

13. Is Nidhi Company able to market its activities?

No, as per Nidhi companies are not authorized to promote their activities through any kind of advertisement This is because the main purpose of Nidhi is to promote the habit of drifting and saving habits among its members and not to solicit deposits through promotions to non-members.

Similarly, Nidhi Company is not authorized to remit any kind of brokerage or incentive for the promotion or mobilization of deposits to members or for the granting of loans.

14How much loan can a Nidhi Company provide to its members?

For Nidhi Company loan limit is dependent upon the amount of deposits it holds. Following are specified limits:

Deposit amount (in Rupees)

Loan Limit (in Rupees)

Less than 2 Crore

2,00,000

2 Crore-20Crore

7,50,000

20 Crore-50Crore

12,00,000

More than 50 Crore

15,00,000

15What do you mean by the Mutual Benefit Company and how it differs from the Nidhi Company?

Mutual Benefit Company is nothing but the Nidhi Company. The mutual benefit is the previous name of the company Nidhi. After 2013, it was made compulsory to use the name of Nidhi Limited instead of the Mutual Benefit for registration of Nidhi Company in India.

16. Who could become a member of the Nidhi Company?

In order to become a member of the Nidhi company, the following requirements must be met:

1. Member must be an individual, and no corporate body or trust can become a member.

2. The member must have reached the age of 18 years.