Registration of Nidhi Company

Registration of Nidhi Company

Do you want to establish a loan or finance company in India? Then you’ve come to the right place since the Nidhi Company is the simplest and most cost-effective way to establish a loan business in India. The Nidhi Company can be started with just seven people and a few simple documents. Nidhi Company registration requires a minimum capital of Rs.5 lakh.

Nidhi Company can only do business with its members, receiving deposits and lending money. It is unable to deal directly with the general public and can only work with its members. However, by submitting a few documents and following a simple procedure, one can simply become a member of Nidhi Company. Furthermore, Nidhi Company registration is the only type of company that can launch a loan company in India without the consent of the Reserve Bank of India.

After three years of business in the district, Nidhi Company can open three branches. Moreover, the company must obtain RD approval before opening any branch outside of the district. Additionally, the Nidhi Company is unable to conduct business outside of the state. As a result, if you want to expand your operation to another state, you’ll need to form a new Nidhi Company.

Rajput Jain & Association maintains hundreds of Nidhi companies across India and is a specialized business for registering and managing Nidhi companies in India. For founding and operating businesses in India, we are a top consulting firm.

Documents needed for registration of a Nidhi company

If you’re planning to start a Nidhi company, you’ll want to keep this collection of paperwork on hand.

Directors and shareholders identities Proof: You must send a copy of your Permanent Account Number card for Indian nationals and a copy of your passport for international citizens as proof of identity for the directors and shareholders.

Directors and shareholders address Proof: You must submit documents such as bank statements and utility bills that are no more than two months old for the address evidence of the company’s directors and shareholders.

Registered office Proof: You must submit a copy of the electricity bill, property tax receipt, or water bill as proof of registered office in India. In the event of rented office space, you must provide a copy of the leasing agreement or an ownership document, as well as a letter from the landlord stating that there are no objections.

• • Photographs of all of the directors must be presented in passport size.
  • Directors and shareholders’ Aadhar cards must be submitted.

Compliances to adhere after the Nidhi Company Registration

Let’s have a look at the list of regulations that must be followed-

• • • You must file the Form NDH 1 within 60 days after the end of each financial year. • After that, you must file the half-yearly returns, which must be filed in the Form NDH. 3
    • Within a year of forming the Nidhi Company, you must have at least 200 members and $10 lakh in net owned funds. If the corporation fails to meet that obligation, you must file a Form NDH 2 appeal for an extension.
    • If you run a Nidhi company, you must file annual returns with the Ministry of Corporate Affairs (MCA) using Form MGT-7.
    • Finally, in Form AOC-4, you must provide Nidhi company financials and other papers.

Conditions to be fulfilled for getting ‘Nidhi’ Company status

To avoid cancellation of your registration or penalties, make sure you comply with these conditions after you have successfully registered the Nidhi Company.

Within a year of the date of registration

1. Within one year of its inception, the Nidhi Company should have at least 200 members.
2. The net owned money should also be at least ten lakh rupees. Equity share capital + free reserves (-) accumulated losses (-) intangible assets = net owned funds
3. Unencumbered term deposits must account for 10% or more of total deposits.
4. The net owned funds to deposits ratio should not exceed 1:20.

If Nidhi Company meets all of the above criteria, it must file NDH-1 together with the required fees within 90 days after the end of the first financial year following incorporation. A practicing CA, CS, or CWA must certify the form.

A second financial year can be requested by submitting NDH-2 to the Regional Director within 30 days after the first financial year’s end.

If it fails to meet the requirements even after the second financial year, it will be unable to receive deposits until it complies with the conditions, and a penalty will be levied.

After the Nidhi Company incorporation there are a few things must be keep in mind.

• The majority of our clients inquire about forming a Nidhi company, but how distinguishes it from NBFCs?

When we examine these two distinct corporate entities, we can see how they differ on a variety of dimensions. When compared to NBFCs, where the paid-up capital requirement is Rs. 2 crores, Nidhi Company is not regulated by the RBI and the capital investment required for establishment is substantially lower.

• Many people wonder why, if the RBI doesn’t have the jurisdiction to control Nidhi firms, these companies are still operating.

Although Nidhi companies are not controlled by the RBI, there is a list of Nidhi Rules given down by the Central Government of India known as Nidhi Rules, 2014 to ensure that these companies are running and operating efficiently. These regulations serve as the framework within which the Nidhi Company functions.

• The amount of loans granted by Nidhi companies to their members.

The amount of the loan offered to Nidhi company members is determined by the amount of money deposited by the business’s members.

Amount deposited by the member	Loan limit provided by the member
Amount deposit less then Rs. 2 Crore	Limit of loan = Rs. 2.00 lakh
Amount Deposit, Rs. 2 Crore< but up to Rs. 20 Crore	Limit of loan = Rs. 7.50 lakh
Amount Deposit, Rs. 20 Crore< but upto Rs. 50 Crore	Limit of loan = Rs. 12.00 lakh
Amount Deposit, more than Rs. 50Crore	Limit of loan = Rs. 15.00 lakh

• If you own or operate a business, the major goal of any of the members engaged is to attract more customers, grow the business, and profit from it. But, for all of these purposes, one must promote in order to make one’s existence known in the market; therefore, are Nidhi companies authorized to promote or not?

These businesses are not authorized to advertise for the promotion of their activity under Nidhi guidelines. Because the major goal of Nidhi companies is to instill the habit of saving among its members, they are not allowed to advertise.

If they begin advertising, it will be construed as a request for deposits from non-members of the Company.

Frequently Ask Question for Nidhi Company Registration

1. What does the Hindi word Nidhi mean?

In Hindi, the word Nidhi means “treasure.” In India, the name Nidhi is also given to females. It is stated that the girl with the name Nidhi holds a lot of information. There is no formal definition of Nidhi in legal terms, thus we use the broader meaning of Nidhi, which is treasure.

2. What is the Nidhi Company’s RBI requirement?

A Nidhi Company is a type of Non Banking Financial Company (NBFC) that does not need RBI approval. The Reserve Bank of India (RBI) has waived the registration requirement for the Nidhi Company. Furthermore, there is no requirement to form a Nidhi Company in India with a minimum capital of Rs.2 crore.

3. What exactly do you mean when you say Nidhi Company rules?

Because the Nidhi Company is administered by the central government rather than the RBI, the central government has enacted the Nidhi Company Rules 2014 in order to better control the company and make it more transparent.

4. Can a Nidhi company engage in microfinance business?

No, Nidhi Company is not permitted to engage in microfinance in India. These are due to the fact that microfinance is a whole distinct line of business for an NBFC, and it necessitates more capital to operate. As a result, Nidhi Company is unable to operate in the microfinance sector. Furthermore, while Nidhi Company raises funds from deposits, if it distributes them on to members without any security, there is a high risk of customer default, which could lead to Nidhi Company’s collapse.

5. Does Nidhi Company require an RBI-issued NBFC license?

No, Nidhi Company does not require an RBI license to begin operations in India. This is because the RBI has exempted Nidhi Company from its fundamental requirements, hence there is no RBI requirement for Nidhi Company registration in India.

6. What is the maximum number of branches a Nidhi Company can open?

After three years of profitable operation, a Nidhi Company can open up to three additional branches. These three branches can also only be opened within the district. Furthermore, you will need the consent of the Regional Director (RD) to open any branch outside of the district.

Furthermore, a Nidhi Company is not permitted to open a branch outside of the state.

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