Nidhi Companies

Table of Contents☰

About Nidhi Companies:

A NIDHI Company is recognised under Section 406 of the Companies Act2013 and typically operates in the Non-Banking Financing Sector of India.
It is formed to borrow and lend money to its members. It inculcates the habit of saving among its members and works on the principle of mutual benefit.
It isn’t required to receive the license from Reserve Bank of India (RBI), as these are registered with the companies act.
Members: Minimum of seven members is required to start a Nidhi Company out of which three members must be the directors of the company.
Activities Prohibited in a Nidhi Company
- It can’t deal with chit funds, hire-purchase finance, leasing finance, insurance or securities business.
- It is strictly prohibited from accepting deposits from or lending funds to, any other person except members.
- Nidhi companies should not issue preference shares, debentures or any other debt instrument in any manner, name or form.
- Nidhi companies should not open current accounts with their members.

Q1: What is a Non-Banking Financial Company (NBFC)?

A NBFC is a company registered under the Companies Act, 1956, engaged in the business of loans and advances, the acquisition of shares/stocks/bonds/debentures/securities issued by the Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business.

Source: MCA cracks down on errant Nidhi companies, penalises two dozen in a fortnight