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NIDHI COMPANY

NIDHI COMPANY

Nidhi companies are a type of Non-Banking Financial Company (NBFC) that are primarily involved in accepting deposits and providing loans to their members. The word "Nidhi" comes from Hindi and means "treasure".

Here are some characteristics of Nidhi companies:

  • Membership: Nidhi companies are exclusive to their members, who are also shareholders.
  • Regulation: Nidhi companies are regulated by the Ministry of Corporate Affairs, but are not directly regulated by the Reserve Bank of India (RBI). However, the RBI can issue directives regarding their deposit-related activities.
  • Purpose: Nidhi companies are focused on promoting savings among their members. They are known for facilitating borrowing and lending money between members.
  • Location: Nidhi companies are more popular in South India, with 80% of them located in Tamil Nadu. 
  • Registration: To register as a Nidhi company, specific conditions must be met, including minimum requirements for share capital, owners' funds, and the number of members.
  • Name: Nidhi companies are registered as Public Limited Companies and must have “Nidhi Limited” as the last words of their name.

Nidhi companies are also known as Permanent Fund, Benefit Funds, Quasi Bank, Mutual Benefit Funds, and Mutual Benefit Company.

Benefits of Nidhi Company

Registering a company as a Nidhi in India offers a range of advantages that extend beyond the primary objective of fostering savings among members. Here are key points emphasizing what is Nidhi company benefits:

  • Easy Formation: Nidhi Companies boast a straightforward and hassle-free formation process with minimal requirements, making it accessible for those looking to establish such entities.
  • Non-Compliance with RBI: Nidhi Companies are not bound by the Reserve Bank of India (RBI) guidelines, allowing them to set their own operational rules and regulations.
  • Lower Risk: Transactions involving lending, borrowing, or depositing are carried out by members of the Nidhi Company, reducing financial risks and ensuring a sense of security within the community.
  • Economic Registration: The registration process for a Nidhi Company is cost-effective when compared to other Non-Banking Financial Company (NBFC) registration procedures, which facilitates easier access to business loans and financing options.
  • Savings Promotion: Nidhi Companies play a pivotal role in promoting a culture of saving among the Indian population, thereby contributing to financial prudence.
  • Net-Owned Funding System: Nidhi Companies typically adopt a cost-effective net-owned funding system, which can enhance their business growth prospects by efficiently utilizing their own resources and funds.

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