A Nidhi Company is a type of Non-Banking Financial Company (NBFC) that promotes thrift and savings among its members. It is governed by Section 406 of the Companies Act, 2013, and operates under the regulatory framework of the Nidhi Rules, 2014. Unlike other NBFCs, Nidhi Companies are exempted from RBI approval since their transactions are limited to their members.
The primary objective of a Nidhi Company is to cultivate the habit of saving among its members while providing financial assistance in the form of loans. The word “Nidhi” translates to “treasure” in Hindi, symbolizing the financial security it provides to its members.
Nidhi Companies operate under:
• Section 406 of the Companies Act, 2013
• The Companies (Nidhi Companies) Rules, 2014
• Chapter XXVI of the Companies Rules, 2014
a. Easy Formation: Minimal compliance requirements make it easy to register.
b. No RBI Compliance: Not governed by RBI regulations.
c. Lower Risk: Transactions are limited to members, reducing financial risks.
d. Cost-Effective Registration: Lower costs compared to other NBFCs.
e. Encourages Savings: Promotes financial discipline among members.
f. Net-Owned Funding System: Allows sustainable business growth.
Nidhi Companies are restricted from:
• Advertising for public deposits.
• Engaging in chit funds, hire purchase, or insurance.
• Issuing preference shares or debt instruments.
• Accepting deposits or lending to non-members.
• Opening current accounts for members.
• Partnering with third parties for lending or borrowing.
Before Registration
• Minimum 7 members and 3 directors.
• Minimum paid-up capital of INR 10 Lakhs (as per the latest amendment).
• Director Identification Number (DIN) and Digital Signature Certificate (DSC) for directors.
• The company name should end with “Nidhi Limited”.
• No issuance of preference shares.
After Registration
• Within 1 year, membership should reach 200.
• Net-Owned Funds (NOF) should exceed INR 20 Lakhs.
• NOF to Deposit Ratio must be at least 1:20.
• Unencumbered deposits should be at least 10% of outstanding deposits.
• Directors’ Identification Number (DIN)
• PAN Card of Directors and Members
• Address Proof of Directors (Aadhaar, Voter ID, Passport)
• Business Address Proof (Rent Agreement, Lease Deed, or NOC)
• Memorandum of Association (MOA) and Articles of Association (AOA)
Step 1: Apply for DIN and DSC
Directors must obtain DIN from MCA and DSC for online filing.
Step 2: Drafting MoA & AoA
Prepare the Memorandum of Association (MoA) and Articles of Association (AoA) specifying the objectives and rules of the company.
Step 3: Name Approval
Submit three name options to MCA. Once approved, the name is valid for 20 days.
Step 4: Application for Registration
Submit the MoA, AoA, and necessary documents for company registration.
Step 5: Obtain Certificate of Incorporation
Within 15-20 days, the company receives the Certificate of Incorporation along with a unique Company Identification Number (CIN).
Step 6: Apply for PAN, TAN & Bank Account
Once registered, apply for PAN, TAN, and open a Nidhi Bank Account.
Annual Compliance Requirements
• NDH-1 Form: Submit the member list within 90 days of the financial year-end.
• NDH-2 Form: Apply for an extension if 200 members are not reached within the first year.
• NDH-3 Form: File a half-yearly return.
• MGT-7 Form: Annual Return with MCA.
• AOC-4 Form: Financial Statements submission.
• Income Tax Returns: Must be filed annually by September 30.
If a Nidhi Company fails to meet compliance requirements within two years, it will be restricted from accepting further deposits and may face penalties.
Example: XYZ Nidhi Limited, registered in 2020, grew from 7 members to 500 members within two years by promoting savings schemes and small business loans at lower interest rates.
Nidhi Companies offer a structured and legally compliant way for individuals to promote financial security and lending within a community. Ensuring proper compliance with Nidhi Rules, 2014 and Companies Act, 2013 is essential for smooth business operations.
A Nidhi Company registration / incorporation is ideal for businesses looking to promote financial inclusion. However, it comes with increased compliance and regulatory requirements. With expert assistance from Return Filings, you can ensure a smooth registration and compliance process for your Nidhi Company. For professional assistance, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091.
