"Nidhi" is a Hindi word, which means finance or fund. Nidhi means a company which has been incorporated with the object of developing the habit of thrift and reserve funds amongst its members and also receiving deposits and lending to its members only for their mutual benefit.
Nidhi company is easy and economical to register. Section 406 of Companies Act 2013 and Companies (Nidhi Companies) Rules, 2014 govern Nidhi companies. It shall be a public company. The Nidhi Company shall have only one object in its memorandum that is of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit. Every Company incorporated as a "Nidhi" shall have the last words 'Nidhi Limited' as part of its name.
No Nidhi shall issue preference shares. If preference shares had been issued by a Nidhi before the commencement of this Act, such preference shares shall be redeemed in accordance with the terms of the issue of such shares. It is a type of Non-Banking Financial Company (NBFC). 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. These companies typically operate in the southern part of the country.
• Before Incorporation
o Minimum Seven People: Minimum seven people are required to start the Nidhi Company in India. These companies shall have a minimum of three directors. The same seven people can become shareholder and director of the company.
o Minimum Capital: Nidhi shall be a public company and shall have a no minimum paid up equity share capital at the time of registration as per Central Government Notification. However, it should have Net Owned Funds of ten lakh rupees or more.
o Unique Name: The name of the Nidhi Company should be unique and should not be similar to any existing company name or trademark.
• After Incorporation
o Not less than two hundred members
o Net Owned Funds of ten lakh rupees or more
o Unencumbered term deposits of not less than ten per cent. of the outstanding deposits as specified in rule 14
o Ratio of Net Owned Funds to deposits of not more than 1:20
• Activities Prohibited in a Nidhi Company
o Nidhi Company 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.
o It can't advertise itself to ask for any deposits
• Loans under Nidhi Company
o The maximum loan to one person will not exceed Rs. 200,000 if the deposit is less than 2 crore.
o A Nidhi Company cannot give any unsecured loan or a micro finance loans.
o The maximum period of a gold loan is 1 year
o Repayment period for a loan against property cannot exceed 7 years.
o Maximum gold loan can be 80% of the value of the gold.
o Maximum loan against a property cannot exceed 50% of the value of the property.
o A Nidhi Company cannot provide vehicle loans.