Nidhi Company Registration
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Nidhi Company Registration in India
The Nidhi Company Registration process in India is the first and most important step toward forming a Nidhi Company under the Companies Act, 2013. Registration is completed through the Ministry of Corporate Affairs (MCA), making it a legally recognized business structure in India.
A Nidhi Company belongs to the non-banking finance sector and primarily focuses on borrowing and lending money exclusively among its members. Its main objective is to promote the habit of savings and provide financial assistance to its members in a secure and regulated manner.
Nidhi Companies are also known as Permanent Funds, Benefit Funds, Mutual Benefit Funds, or Mutual Benefit Companies. They are regulated by the Ministry of Corporate Affairs, Government of India, and not by the Reserve Bank of India.
These companies are most popular in South India and usually operate as localized, single-office institutions. Since they function as mutual benefit societies, their financial activities are restricted only to their members, and membership is limited to individuals. Loans provided by Nidhi Companies are generally secured and are commonly offered for housing construction, repairs, or personal needs.
The Nidhi Company Registration in India is one of the most preferred choices for entrepreneurs looking to enter the financial services sector with minimal regulatory complexity. If you are planning to register a Nidhi Company, you are in the right place. Below, you can find a detailed step-by-step process for Nidhi Company Registration in India.
Note: No approval from the Reserve Bank of India (RBI) is required for Nidhi Company registration, as this category of NBFC has been specifically exempted by the RBI.
Business Setup in India
- Sole Proprietorship Registration
- Partnership Firm Registration
- Private Limited Company
- Public Limited Company
- One Person Company (OPC)
- Limited Liability Partnership
- Foreign Company Registration
- Chit Fund Company Registration
- Nidhi Company Registration
- Section 8 Company
- Society Registration
- Section 8 Microfinance Company
- NGO Registration
- Producer Company Registration
- NBFC Registration
- IRDA Insurance Marketing Firm
Nidhi Company Process
The Nidhi Company registration process in India is simple and straightforward. Understanding the required steps makes it easier to complete the registration smoothly. The process follows the standard procedure for registering a public limited company, which includes checking name availability, filing the Memorandum of Association (MOA), Articles of Association (AOA), and submitting other mandatory documents.
Special attention must be given to the object clause of the MOA, which should strictly focus on promoting the habit of thrift and savings among its members, as mandated under the Companies Act, 2013. Additionally, the name of the company must mandatorily end with “NIDHI LIMITED” to comply with statutory requirements.
The Nidhi Company registration process is a crucial step in starting a financial services business in India. Once the business operations commence, the company must be registered with the Registrar of Companies (ROC) within the prescribed timeline. Timely registration ensures legal compliance and allows the company to operate without regulatory hurdles.
By following the correct registration procedure and ensuring compliance with legal requirements, entrepreneurs can establish a Nidhi Company efficiently and confidently.
- After Nidhi company, every Nidhi shall ensure that it has-
- (a) Not less than 200 members.
- (b) Net-owned funds of Rs10 lakh or more.
- (c) Unencumbered term deposit of not less than 10% of the outstanding deposit.
- (d) Ratio of Net owned funds to deposit of not more than 1:20.
Benefits of Nidhi Company in India
- A Nidhi Company primarily mobilizes small savings from the middle-class population and provides loans to eligible members, encouraging a culture of savings and mutual financial support.
- Loan repayment is generally well assured, as advances are secured in nature and reinforced by strong peer accountability, ensuring borrowers repay their dues on time.
- Nidhi Companies offer attractive interest rates on deposits, making them a preferred investment option, particularly for senior citizens and risk-averse investors.
- The Board of Directors of a Nidhi Company typically comprises experienced and respected individuals with sound knowledge of financial management and a strong standing within the community.
Branches of Nidhi Company
- A Nidhi Company is permitted to open branches only after earning net profits after tax for three consecutive financial years.
- A Nidhi Company may open up to three branches within the same district without requiring additional approvals.
- If a Nidhi Company proposes to open more than three branches within a district, it must obtain prior approval from the Regional Director.
- No Nidhi Company shall open any branch, collection center, or office unless its financial statements and annual returns are duly filed with the Registrar of Companies (ROC).
- A Nidhi Company may close any of its branches only after intimating the Registrar within 30 days of such closure.
Deposits in Nidhi Company
- Fixed Deposits (FD): Accepted for a minimum period of 6 months and a maximum period of 60 months.
- Recurring Deposits (RD): Accepted for a minimum period of 12 months and a maximum period of 60 months.
- Savings Deposit Account: Maximum balance should not exceed ₹1,00,000, and the interest rate shall not exceed 2% per annum.
- Deposit Repayment: A Nidhi company shall not repay any deposit within 3 months from the date of acceptance.
- Interest Entitlement: Depositors shall not be entitled to any interest for the first 6 months from the date of deposit.
Loans in Nidhi Company
- 1) The loans are provided only to the members of the Nidhi company.
- 2) The loans given by Nidhi company to the members are as follows;
- Members with total deposits less than ₹2 Crores: Maximum loan eligibility of ₹2 Lakhs
- Members with total deposits between ₹2 Crores and ₹20 Crores: Maximum loan eligibility of ₹7.5 Lakhs
- Members with total deposits between ₹20 Crores and ₹50 Crores: Maximum loan eligibility of ₹12 Lakhs
- Members with total deposits above ₹50 Crores: Maximum loan eligibility of ₹15 Lakhs
- 3) A Nidhi shall give loans to its members against securities like gold, silver, jewelry, immovable property, fixed deposit, national savings certificate, and other government securities and insurance policies.
- 4) The rate of interest charged on any loan given by Nidhi shall not exceed 7.5%.
Characteristics of Nidhi Company
- 1. It is allowed to transact business only with its members and with nobody else.
- 2. Nidhi companies cannot issue preference shares.
- 3. They do not operate on an Indian basis.
- 4. They are incorporated as public companies with a minimum paid-up equity share capital of Rs. 5,00,000.
- 5. The loans provided by these companies are fully secured.
- 6. Nidhi can declare dividends not exceeding 25%.
- 7. A director of Nidhi company shall hold office for 10 consecutive years.
Why VRegister Startups?
Registering a company is a straightforward process, but it requires professional guidance to ensure a smooth experience. At VRegister Startups, we help you take the next step toward owning your company with a hassle-free registration process. Our team of experts provides guidance at every stage, helping you make informed decisions tailored to your business needs. We also offer a variety of company registration packages to suit different requirements and budgets.