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Nidhi Company Registration
Overview of Nidhi Company
Nidhi Company is the most straightforward and affordable way to start loan business in India. Nidhi Company means a company which tries to cultivate the habit of saving by accepting deposits and providing loans amongst its members. Hence, the nature of the company is exactly the same as it sense and starting a Nidhi company is indeed will be a good way out for you to start a financing company.
Nidhi Company are also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company They are also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company.
Nidhi Company can only do business of accepting deposit and lending money to its members only. It cannot deal with the public directly and can only work with its members. However, one can easily make members under Nidhi Company with few documents and easy process. Also, Nidhi Company registration is the only form of company available to start the loan company in India without RBI approval.
Nidhi Company mainly earns through interest on loans and its main expenditure is to pay interest on deposits (FD, RD and savings).
Nidhi Company can open three branches after three years of working within the district. Further, to open any branch outside the district, the company shall require RD approval. Furthermore, the Nidhi Company cannot work outside the state. Hence, if you want to expand your business to another state, then you will need to register another Nidhi Company.
It only requires 7 person with easy documents requirement to start the Nidhi Company. The minimum capital requirement for Nidhi Company registration is Rs.5 lakh.
Factors of Consideration before Nidhi Company Registration
No RBI Approval Required
Nidhi Company do not require RBI approval or registration to do loan business in India
Interest on loan
Nidhi Company can earn max 20% interest on loan on reducing balance method
Branches for NidhiNidhi Company can open 3 branches after 3 years within the district
Loan against security
Nidhi Company can lend only against gold, property, FD, Govt securities
Members under Nidhi CompanyNidhi Company can deal with its members only & has to make min 200 members within 1 year From incorporation
Interest on deposits
Nidhi Company can accept FD, RD & savings and can earn 12% rate of interest.
Net owned funds
The net owned funds should be 10 lakh rupees or more. Net owned funds = Equity share capital + free reserves (-) accumulated losses (-) intangible assets
Unencumbered term deposits must be 10% or higher of the outstanding deposits
Benefits of Nidhi Company Registration
Easy to Form Management
Requires only 7 persons where 3 will be appointed as Director.
Simple Registration process.
No RBI Approval
Nidhi company registration is very simple and the level of complexity as compared to other types of finance companies like NBFC is minimal in Nidhi Company.
Cost Efficient RegistrationRegistering Nidhi Company is pocket-friendly. The minimum capital requirement for registering a =Nidhi Company is Rs 5 lakh which you can invest within 2 months after getting your Nidhi Company registered.
No RBI Regulations – less compliance.
Nidhi companies follow Nidhi Rules, 2014 issued in respect of the activity and working of the company. Nidhi Company by its nature of activity comes under the category of NBFC but does not require RBI approval. RBI has exempted Nidhi Company from following stringent compliances as RBI will not bother if you starting a Nidhi Company in India, so you don’t need to be in rush-n-hush.
More Certainty in Nidhi companyThe main objective of Nidhi company is to boost the habit of saving amongst its member which means it is certain and going concern business as the members will not stop savings anytime.
Less level of Risk – Non- payment loansIt is very clear that Nidhi Company can accept deposit and provide loans to its members only according to the Nidhi Rules, 2014 which means the risk of non- repayment of loans is less as compared to other finance business. It is the safest route for lending loan and the loans given to members are at very low rates in comparisons with other providers which again bring greater savings amongst members.
Net owned fund- Invest one get twenty
Net owned fund means the amount of capital invested by owner in its business for raising funds. The net owned fund ratio of Nidhi Company is 1:20, which means you invest one rupee and raise the deposit of twenty rupees.
Nidhi Company Registration
Nidhi Company Registration
The following eligibility criteria must be fulfilled for Nidhi Company Registration:
Minimum 3 Directors
Minimum 7 Members
Must be a Public Limited Company
The object of the company shall be cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending to its members only for their mutual benefits
It shall have a minimum paid up equity share capital of Rs. 5,00,000/-
It shall have the words ‘Nidhi Limited’ as part of its name
Process of Nidhi Company Registration
The following process has to be followed for Nidhi Company’s Registration:
KYC of Directors and Member and Obtaining the Digital Signature Certificate
All the shareholders and directors must undergo the KYC process. An individual can be the director, as well as a member. DSC is required for both Director as well as Members
Application for Name Approval
The name shall have “NIDHI “ in its name.
Name shall be unique and it shall not resemble the name of registered companies.
The Name shall not against the any provisions relating to intellectual property rights in India.
At least 3 names shall be suggested. MCA will reject 2 names and only 1 will get approved.
The name approval certificate would be valid for 20 days, in that duration, Applicant has to start process of incorporation of company.
Drafting of Memorandum of Association and Articles of Association
Draft Object Clause and MOA and AOA shall be finalized before making application for Incorporation of Nidhi Company. Along with MOA and AOA Other documents like INC 9, INC 10 and DIR 2 are prepared and shared for signature.
Filling of online application for Incorporation
After Name Approval, Once all the documents are signed by the promoters the next step is to file the company incorporation with SPICE+ Form with MCA.
Approval of application for Incorporation
Before COI issuance, an inspection of the application takes place in an orderly manner. And finally, COI is issued.
Receipt of PAN and TANYou are likely to receive your PAN and TAN within a week.
Opening Bank Account
It is necessary to open a bank account to do business transactions. Submits the Memorandum of Association, Articles of Association, Certificate of Incorporation, and PAN to the bank, and eventually, you will get your bank account opened.
Documents required for Incorporation of Nidhi Company
Identity and Address Proof of Directors and members
Passport size photographs of the directors
Copy of Aadhar Card
Copy of Driving License or Voter ID or Passport
Copy of PAN Card
Copy of bank statement or electricity bill or mobile bill (not older than two months)
Copy of Passport
Proof of Registered Office
Copy of electricity or any other utility bill (not older than two months)
Rent agreement or lease deed(if rented)
No Objection Certificate (NOC) from the owner of the property
Loan & Deposit under Nidhi Company
Nidhi Company is becoming so much common amongst the business man who wants to start the finance or loan business. The main reason behind this fact is the advantage of Nidhi Company to accept deposit from public and to lend money to public (members) without any RBI approval. Let us understand brief about the loan and deposit under Nidhi Company.
Loan under Nidhi Company | Deposits under Nidhi Company |
Nidhi can lend three types of loans;
| Nidhi can accept three types of deposits;
|
Nidhi cannot engage micro finance business but can lend secured loan @20% interest. | Nidhi can pay interest up to 12.5% on FD & RD and 6% on savings accounts. |
Nidhi can take legal action if any member failed to repay any sum of money. | Nidhi can take deposits up to 20 times the funds invested. Invest 5 lakh and accept 1 Cr. |
Following Compliance has to be followed after incorporation of Nidhi Company:
Form NDH-1- we have to file NDH-1 within 90 days from closure of first financial Year. If incorporated Nidhi Company has fulfills all the conditions of Nidhi Rules 2014 IF this return is not filed timely, then you will loose the Nidhi Company status from the central government.
Form NDH-2 –If company fails to meet the compliances of:
Maintaining a minimum of 200 members within one year of incorporation, and Not maintaining the NOF to deposit ratio of 1:20.
Then application in Form NDH-2 has to be made to reginal director within 30 of closure of financial year.
Form NDH-3 – This form is filed with the Registrar of Companies (ROC) within 30 days from the completion of each half year. It is filed in order to check whether the Nidhi company is working as per the rules or not. This return is to be filed by 30th September and 31st March each year.
Annual Returns- Annual Returns have to be filed within 60 days of AGM to the Registrar of Companies.
Financial Statements- The financial statement has to be submitted in form AOC-4 within 30 days of AGM.
Income Tax Returns- Every Nidhi Company is required to file income tax returns as per the requirements of the Income Tax Act.
Net Owned Fund- A Nidhi Company must have a Net Owned Fund which is more than Rs 10 lakhs. The ratio of return on the Net Owned Fund must be 1: 20 basis.
Prohibition on certain activities of Nidhi Company
Nidhi Company is not entitledTo issue preference shares, debentures, or some other debt instruments
To do micro finance business & vehicle finance business & Hire-purchase finances
To Invite and accept deposits from their own members rather than other members
To do any business other than borrowing and lending to its members
To engage in Chit funds business and leasing financeLotteries
To open the current account of its members
To get into a partnership arrangement to carry lending as well as borrowing activities
To do Insurance business
To accept and lend deposits from and to corporate
To pay fee, incentive, and commission for mobilization of deposits
To pay brokerage amount for granting loans to the members
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