Comprehensive Guide to Nidhi Company Registration in India

1. Introduction to Nidhi Company

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.

2. Purpose and Nature of Nidhi Companies

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.

3. Legal Framework Governing Nidhi Companies

Nidhi Companies operate under:

• Section 406 of the Companies Act, 2013
• The Companies (Nidhi Companies) Rules, 2014
• Chapter XXVI of the Companies Rules, 2014

4. Benefits of Registering a Nidhi Company

1. Easy Formation: Minimal compliance requirements make it easy to register.
2. No RBI Compliance: Not governed by RBI regulations.
3. Lower Risk: Transactions are limited to members, reducing financial risks.
4. Cost-Effective Registration: Lower costs compared to other NBFCs.
5. Encourages Savings: Promotes financial discipline among members.
6. Net-Owned Funding System: Allows sustainable business growth.

5. Restrictions on Nidhi Companies

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.

6. Minimum Requirements for Nidhi Company Registration

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.

7. Documents Required for Nidhi Company Registration

• 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)

8. Step-by-Step Nidhi Company Registration Process

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.

9. Post-Registration Compliance for Nidhi Companies

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.

10. Consequences of Non-Compliance

If a Nidhi Company fails to meet compliance requirements within two years, it will be restricted from accepting further deposits and may face penalties.

11. Case Study: Successful Nidhi Company Implementation

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.

12. Conclusion

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.

13. Additional Resources

For further reading, explore:

• Nidhi Company statutory returns and annual compliance checklist
• Non-Bank Finance Company Registration: Step-by-Step Guide to Start Your NBFC
• Small Finance Bank Licence – Guide to obtain Small Finance Bank Licence
• Housing Finance Company Registration – Step-by-step guide for HFC registration

Frequently Asked Questions (FAQs) on Nidhi Company Registration in India

A. General Information about Nidhi Companies

1. What is a Nidhi company?

A Nidhi company is a type of Non-Banking Financial Company (NBFC) in India that operates primarily by accepting deposits from and lending to its members only. They are also known as Mutual Benefit Funds or Benefit Funds. They are regulated by the Ministry of Corporate Affairs (MCA), with specific directions from the Reserve Bank of India (RBI).

2. What are the main objectives of a Nidhi company?

The core objectives are:

2. • To cultivate the habit of thrift and savings among its members.
   • To provide financial assistance to members in the form of loans.
   • To operate on the principle of mutuality, where members are both depositors and borrowers.
3. What are the key characteristics of a Nidhi company?

Key features include:

3. • Membership-based: Only members can deposit and borrow.
   • Mutuality principle: Members are both depositors and borrowers.
   • Acceptance of deposits from members.
   • Lending to members.
   • No dealing with the public: Cannot accept deposits from or lend to non-members.
   • Subject to specific regulations: Governed by the Companies Act, 2013, and Nidhi Rules.
4. What are the advantages of registering as a Nidhi company?

Advantages include:

4. • Formal structure for managing member funds.
   • Legal recognition and credibility.
   • Ability to mobilize savings and provide loans to members.
   • Potential for growth and expansion within the member base.

B. Incorporation and Regulatory Aspects

5. How many people are required to incorporate a Nidhi company?

A minimum of seven members are required to form a Nidhi company.

6. Who can be a member of a Nidhi company?

Any individual can become a member, subject to the company’s membership criteria. Minors can also become members (represented by a guardian).

7. Can a Nidhi company accept deposits from non-members?

No, Nidhi companies can only accept deposits from their members.

8. Can a Nidhi company lend to non-members?

No, lending is restricted to members only.

9. Can a Nidhi company engage in other financial activities?

Nidhi companies are restricted to accepting deposits from and lending to their members. They cannot engage in other NBFC activities like insurance, hire-purchase, or leasing.

10. What are the Net Owned Funds (NOF) requirements for a Nidhi company?

Nidhi companies must maintain a minimum NOF as prescribed by the Nidhi Rules. This ensures financial stability.

11. What are the deposit acceptance norms for Nidhi companies?

There are specific rules regarding the types of deposits Nidhi companies can accept, the maximum amount of deposits, and the tenure of deposits.

12. What are the lending norms for Nidhi companies?

Nidhi companies also have lending restrictions, including limits on the amount of loans that can be given to members.

13. Can a Nidhi company open branches?

Yes, Nidhi companies can open branches, subject to RBI guidelines and state government permissions.

14. What are the compliance requirements for a Nidhi company?

Compliance requirements are stringent and include:

14. • Maintaining proper books of accounts.
    • Conducting annual audits.
    • Filing annual returns with the MCA.
    • Complying with RBI directions related to NOF, deposits, and lending.
    • Adhering to Nidhi Rules.
15. What is the process for registering a Nidhi company in India?

The process is similar to registering any other company, but with additional regulatory requirements specific to Nidhi companies. It involves applying to the MCA and complying with the Nidhi Rules.

16. How long does it take to register a Nidhi company?

The registration process can take several weeks or months, as it involves scrutiny by the MCA and compliance with specific regulations.

C. Other generally asked questions related to Nidhi company registration:

17.   How do I start a Nidhi company in India?

Covered in the registration process details.

18. What are the rules and regulations for Nidhi companies?

Refer to the Nidhi Rules and RBI guidelines.

19. What is the minimum capital required for a Nidhi company?

Check the latest Nidhi Rules for the current NOF requirements.

20. Can a Nidhi company accept deposits from the public?

No, only from members.

21. Can a Nidhi company advertise its deposit schemes?

There are restrictions on advertising.

22. How do I become a member of a Nidhi company?

Contact the Nidhi company directly for membership details.

23. What are the interest rates offered by Nidhi companies?

Interest rates are determined by the Nidhi company, within permissible limits.

24. Are Nidhi companies regulated by the RBI?

Yes, they are regulated by the MCA, with specific directions from the RBI.

25. What is the difference between a Nidhi company and other NBFCs?

Nidhi companies deal only with their members, while other NBFCs can deal with the public.

26. How do I wind up a Nidhi company?

The winding-up process is governed by the Companies Act and Nidhi Rules.