Deposit and Loan of Nidhi Company
Nidhi is a company recognized under Section 406 of the Companies Act 2013 as amended by the Nidhi Rules 2014. Their main functions are to lend and lend money between their members and they come under the non-banking Indian financial sector. It is a society founded for the express purpose of cultivating among its members the habit of thrift and thrift. They are known by various names such as provident funds, permanent fund, mutual benefit funds or mutual benefit society. Accepting deposit and providing loan to its member is one of the main reasons for setting up Nidhi. We will discuss how much Nidhi can accept deposit from members and how much credit she can provide to her members. This article focuses on all about deposit and loan of Nidhi company. 

Table of content

What are the basic requirements of a Nidhi company? 

For registration of Nidhi company basic requirements need to be fulfilled –

  • Minimum Members – It is mandatory for Nidhi to have a minimum of 7 members. Of these 7 members, 3 members are company executives.
  • Equity funds – minimum fund of Rs. 5 million is needed.
  • Funding Subject – Nidhi accepts deposits from its members and also lends money to its members. Nidhi Society is established for the mutual benefit of its members.
  • Value of Shares – The face value of shares shall not be less than Rs. 10 per share.
  • Minimum holding for each shareholder – Minimum 10 shares or shares equivalent to Rs. 100.

List of documents required for registering a Nidhi company

To register Nidhi, you will need the following documents:

  • Pan card of all Nidhi company members
  • Photos of the directors
  • Address proof of all company members (directors)
  • Proof of identity of company executives
  • Director identification number
  • Proof of residence
  • In the case of rented premises, it is necessary to submit a rental agreement
  • If you have rented a property, then you will need a NOC certificate from the property owner
  • MZe or charter
  • AoA or bylaws
  • MCA Form Attestation

Features of Deposits made under -Nidhi Company Loan System

Accepting deposits is a key feature of Nidhi, here are some features:

  • Fixed deposits can be accepted for a minimum period of 6 months, the maximum period is 60 months.
  • In the case of a repeated deposit, the minimum period is 1 year and the maximum is 60 months.
  • The maximum limit that a bank account cannot exceed is 1 Lakh Rupees.

What content should be incorporated in application form of deposit? 

The deposit application form should contain the following details:

  • Name of Nidhi
  • Date of Incorporation of Nidhi Company
  • Store operated by Nidhi with branch details if any
  • Brief details of the management of Nidhi (name, addresses and occupation of directors 
  • Net profit of Nidhi before and after creation of tax for the previous three financial years 
  • Dividend declared by Nidhi during the previous three financial years √ Method of repayment of deposit 
  • Maturity of deposit
  • Interest payable on deposit
  • The interest rate payable to the depositor in case the depositor withdraws the deposit early 
  • The conditions under which the deposit may be accepted or renewed 
  • An overview of the company’s financial results according to the last two audited financial statements
  • Any other special features or conditions under which the deposit is accepted or renewed

Loans under Rule 15 of Nidhi rules 2014

Below are the credit limits set against the deposit made:

Deposit made (Rs) Loans granted (Rs)
Less than 2 crore 2 lakh
Greater than 2 crore but lesser than 20 crore 7.5 lakh
Greater than 20 crore but lesser than 50 crore 12 lakh
50 crores of more 15 lakh

Nidhi, which has not generated profits continuously during the previous three financial years, is not allowed to make any new loans in excess of 50% of the maximum amount of loans mentioned above. A member will not be eligible for any loan if they are in default on any previous loan repayment.

Loans can only be granted against the following security

  • Gold/jewellery
  • Ownership
  • Fixed backup
  • Insurance Conditions

Nidhi companies cannot provide a personal loan, vehicle loan, hire purchase or microfinance. Nidhi Societies are established to inculcate the habit of saving among its members and are governed by the Companies Act. Although Nidhi companies are non-banking finance companies, they are excluded from the basic provisions of the RBI Act and other guidelines applicable to NBFCs.

Conclusion

Although Nidhi falls under the NBFC category due to nature of business, it does not require RBI approval. Nidhi companies generate funds through borrowing and lending. A Nidhi company must be incorporated as per the Nidhi Rules 2014 framed by the Central Government of India.

Copyright © 2022 Goyal Mangal & Company.