Nidhi means a company which core business is of receiving deposits from and lending money for their mutual benefit among their members, thus promoting a habit of small savings amongst its members. This company is also called “mutual benefit company” and is targeted at the lower & middle-class people. These companies are also known under different names such as Nidhi, Permanent Fund, Mutual Benefit Company and mutual benefit funds. Nidhi company registration have more demands in south part of our country. Company can provide loans only to the members and that too at an reasonable rate of interest. Government has issues separate set of rules for Nidhi Company called “Nidhi Rules, 2014”.
Nidhi Company is one of the categories of NBFC’s or we can say that it is the cheapest form of NBFC as well. Also, it is a very easy form to register & does not require much capital. It is registered just like a limited company, involved in taking deposits & lending to its members. We can say that it is a small & legal way to start the finance business in India. It is to be noted that, RBI has exempted Nidhi Companies from the various regulations applicable on NBFC. However, Reserve Bank of India is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, the deposits mobilized by Nidhis are not much, when compared to the organized banking sector.
If the Nidhi Company is able to satisfy all the aforesaid conditions, then it shall file NDH-1 within ninety days from the close of the first financial year after its incorporation (and where applicable, the second financial year*), duly certified by a practicing CA/CS/CWA along with the required fees. *In case the Nidhi Company is not able to meet the above requirement at the end of one year from commencement, it may apply to the Regional Director in Form NDH-2 for extension of time, within thirty days from the close of the first financial year.
However, if even after the second financial year, it is not able to meet the requirements for a Nidhi Company, then it shall not accept any further deposits from the commencement of the second financial year until it complies with all the mandatory provisions for operating as a Nidhi Company. It shall further be liable for penal consequences.
Moreover, the Nidhi Company shall also file NDH-3 within 30 days from the end of each half year.
If the nidhi company contravenes any of the afore-mentioned provisions, the company & every officer in default, shall be punishable with fine which may extend to Rs.5000 and where the contravention is a continuing one, a further fine which may extend to Rs.500, for every day during which the contravention continues.
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