What is a Nidhi Company?
Nidhi Company is a non-banking finance firm that comes under Section 406 of the Companies Act, 2013. The basic business of a Nidhi company is lending money to the member of the company. Permanent funds, mutual benefit funds, a mutual benefit company and benefit funds are few examples of a Nidhi Company.
Characteristics of Nidhi Company
- A Nidhi company promotes small savings among the middle and lower middle class.
- Accepts term deposits based on timely returns
- The members of a Nidhi Company get easy access to loans against collaterals.
- Promotes effective means of savings and sanctions loans with minimum documentation.
- The membership structure is very rigid and therefore it follows a very secure means of investment.
- A Nidhi company mainly deal with and support small income groups.
- Depends on the honesty, integrity and loyalty of a member.
- Setting up a Nidhi Company does not require any RBI regulations
- There are lesser level of risks
- A Nidhi company follows a cost-effective registration process
- The objective of a Nidhi is to cultivate the habit of savings amongst the members.
Minimum requirements for Nidhi Company
- Should be a Public Company having a minimum paid-up capital of Rs. 5 lakhs.
- Not allowed to issue preference shares.
- The last words of the name of the company should be “Nidhi Limited”.
- Minimum 3 Directors who must mandatorily be members of Nidhi Company.
- Minimum 7 shareholders.
- Minimum of 200 members