Features of Nidhi Company
- Only members are allowed to lend and borrow money.
- It doesn’t need any approval of Reserve Bank of India.
- The Nidhi Company must also assure that the ratio of net owned fund to deposit is more than 1:20.
- Within a period of one year from the commencement, company have atleast 200 Members.
- There should be at least Rs.10/- to the members of a Nidhi company that is approved with equity share.
- Contributed money is used to offer loans to its own members according to their needs at very reasonable rates.
- It has no issuances of preference shares.
- Minimum Documentation and formalities for taking loan.
Essentials for obtaining Nidhi Company :
- Minimum 3 Directors and 7 shareholders are required to start a Nidhi Company.
- It should have minimum net owned funds of minimum Rs. 10 lakhs within an initial year.
- Minimum Rs. 5lakh as an Auhtorized Capital is required to Incorporate Nidhi Company.
- The ratio of net owned funds to deposits should not exceed 1:20.
- Unencumbered deposits must be a minimum of 10% of outstanding deposits.
- Every company that embraces the activities of a Nidhi shall have the last words as ‘Nidhi Limited’ at the end of its name.
Advantages / benefits of Nidhi Company :
- Nidhi Company has its separate legal entity under the Companies Act, 2013.
- Nidhi companies hold considerable goodwill in the market as compared with other Companies.
- The continuity of Nidhi Company do not effects the death and non-existence of any member. It keeps operating and functioning until the Company is legally dissolved or exempted by order of law.
- It has Limited Liability..
- Nidhi companies enjoy better credibility as opposed to any other members.
- It can own any property on its name and incur debts solely.
- The loans from the Nidhi Company come at a cheaper rate than loans from banks and other NBFCs.
- Nidhi Company is the safest and the cheapest way of inviting deposits from the general public.
- No external factors are affecting the working of Nidhi Company
- Minimum Documentation and formalities for taking loan.
Nidhi Company doesn’t have permission to deal with the following:
- Hire purchase Finance.
- Leasing Finance.
- They cannot advertise themselves.
- They can not involve in Chit funds.
- Insurance.
- Lotteries.
- Sell the assets of its members kept as security for providing loan.
- Entering into a partnership firm for carrying out lending and borrowing activities.
- Open any current account with its members.
- A Nidhi shall not admit a body corporate or trust as a member.
- They shall not issue debenture, preference shares, any other debt instrument whatsoever in any form.
- Pay any kind of incentive or brokerage for summoning deposits from members or for conceding loans or for preparation of funds are strictly prohibited in Nidhi..
- It has no issuances of preference shares.
- Minimum Documentation and formalities for taking loan.
Rules regarding the Loans from Nidhi:
- As per the law, a Nidhi company can give loan upto Rs.2 lakh if the amount of deposits is less than two crore rupees.
- Between two crore to twenty crore rupees, can give loan upto Rs. 7 Lakh 50 Thousand only.
- Between twenty crore to fifty crore rupees, can give loan upto Rs. 20 Lakhs only.
- If the deposit is more than fifty crore rupees. can give upto Rs. 15 lakhs