NIDHI COMPANY IN INDIA 2022
A Nidhi company 2022 is categorized as a non-banking financing company(NBFC) and is registered under Section 406 of Companies Act, 2013. The main business of such a Nidhi company is to facilitate the lending of money between the core members of a company. This is done mainly to encourage members or shareholders to save and invest money within the company. Such deposits are then used by the said company for its members/shareholders, to give loans/advances, and is also used to obtain government-issued stocks/ bonds/ debentures/ securities etc. A Nidhi company is regulated by the Ministry of Corporate Affairs and the RBI monitors all its financial dealings.
ADVANTAGES OF A NIDHI COMPANY IN INDIA 2022
- A member in a Nidhi company 2022 can borrow money at a minimum rate of interest which is relative to the prevailing rate of interest charged by banks. This becomes a major benefit in times of need, as different individuals in a Nidhi company are likely to need funds at different points in time
- A Nidhi company encourages all its members to save money and thus promotes a thrifty lifestyle. It is after all a mutual benefit society where its members can lend or borrow money and accept financial aid amongst them
- Since the borrowing and lending of money in a Nidhi company is done between known people and the procedure is fixed, it is much less complicated than dealing with banks. A Nidhi Company helps its members unlock the potential of their money and gain from lower interest rates when they require money themselves
REQUIREMENTS FOR A NIDHI COMPANY
- At least seven members are needed to form a Nidhi company. Out of these seven members, three have to be designated as the directors. However, a Nidhi company should obtain a minimum of 200 members within one year of its commencement
- A company must have a minimum equity share capital of INR 5 lakhs to register as a Nidhi Company. This entire amount has to be paid up front. However, the Net Owned Funds (NOF) have to be increased to INR 10 lakhs within a year of its registration. Also, 10% of a Nidhi company’s outstanding deposits should consist of un-encumbered term deposits. The prescribed NOF to deposits ratio must be 1:20, where 10% of the total deposits are in a fixed deposit account of a nationalized bank. This includes equity share capital and free reserves and does not include the accumulated losses as well as intangible assets.
10 THINGS NIDHI COMPANIES ARE NOT PERMITTED TO DO AS A NON-BANKING FINANCIAL COMPANY (NBFC)
- It cannot be involved in the chit fund business
- It cannot be involved in hire purchase finance
- A Nidhi company cannot be involved in the acquisition/insurance of securities issued by any corporate
- A Nidhi company cannot engage as an NBFC in the business of advances or loans
- It cannot be involved in leasing finance
- It cannot be involved in the acquisition of stocks/shares /bonds/securities/debentures issued by any local authority /Govt./marketable securities
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