Nidhi Company Registration in India
A Nidhi Company is a non-banking financial institution in India, regulated by Section 620A of the Companies Act, 1956. Its primary business involves borrowing and lending money exclusively among its members. Nidhi companies go by various names such as Nidhi, Permanent Fund, Benefit Funds, Mutual Benefit Funds, and Mutual Benefit Companies.
These companies can engage in financial activities like collecting deposits from their members through fixed deposits, recurring deposits, and open savings accounts. Additionally, they offer loans to their members for various purposes, including personal, property, mortgage, jewelry, gold, and vehicle loans.
Nidhi companies are more prevalent in South India and operate as localized single office institutions. They function as mutual benefit societies, limited to their members who are individuals. The main source of funds for Nidhi companies is the contributions made by their members. These companies must adhere to the guidelines set by the Reserve Bank of India (RBI) and are not allowed to offer plans involving loans or deposits exceeding five years. The loans provided to members are typically secured and offered at reasonable rates, often for purposes like home construction or repairs.
While Nidhi companies promote thrift and savings habits among their members, their deposit collection is relatively limited compared to traditional banks. The term “Nidhi” means “treasure” in the Indian context, but in the financial sector, it refers to any mutual benefit society recognized as a Nidhi Company by the Central Government.
To establish a Nidhi company, it is required to have at least 200 members in the first financial year. If unable to meet this requirement, the company must seek permission from the registrar of companies for an extension to reach the minimum member count.
