By CS Megha Saraf
Nidhi as the Hindi word denotes “sampatti” is a type of public company which may be incorporated with an exclusive object of cultivating the habit of thrift and savings amongst its members, deposits from, and lending to, its members only, for their mutual benefit. The same is a type of company which may be incorporated under Section 406 of the Companies Act, 2013, read with the applicable rules, as a public company with a minimum paid-up equity share capital of Rs. 5 lakhs. Although the activities of a Nidhi company is similar to that of a non-banking financial company, as to accepting deposits and granting loans, however, they have been exempted from the purview of the RBI Act, 1934 by virtue of the RBI Master Direction- Exemptions from the provisions of RBI Act, 1934.
Requirements for incorporating a Nidhi company
In order to incorporate a Nidhi company, it shall have:
- atleast 200 members;
- Net Owned Funds of Rs. 10 lakhs or more;
(Note: Net Owned Funds= aggregate of paid up equity share capital + free reserves – accumulated losses and intangible assets appearing in the last audited balance sheet)
- Unencumbered term deposits of atleast 10% of the outstanding deposits;
- Ratio of Net Owned Funds to deposits not more than 1:20;
- Issuance of shares of nominal value of atleast Rs. 10 each;
- To allot a minimum of 10 equity shares or shares equivalent to Rs. 100.
In order to clarify point no. 4, let us take an example; Company X has 20 equity shares of face value of Rs. 10 each. Mr. A, an individual shall be required to subscribe atleast 10 equity shares in order to deposit Rs. 2000 in the Company. Further, as evident, such subscription of equity shares shall not provide any interest to the deposit holder, but, shall form part of the shareholders’ funds of the company.
Requirements w.r.t deposits and loans
As mentioned above, the objective of a Nidhi company is to take deposits and provide loans to its members. The Ministry of Corporate Affairs (“MCA”) being the regulator of Nidhi companies has regulated the norms for taking deposits and providing loans which are as follows:
The Nidhi company shall be allowed to accept deposits with the following timelines:
- Fixed deposits- 6 to 60 months
- Recurring deposits- 12-60 months
- Recurring deposits relating to mortgage loans- Maximum period shall correspond to the repayment period of loans granted.
Interest rate on deposits
- Savings Account- Maximum 2% above the rate allowed by nationalized banks
- Fixed and Recurring deposits- At par with the RBI rate
A Nidhi company can provide loan to its members as per the following ceiling limits:
- Where total amount of deposits from its members is less than Rs. 2 Cr- Rs. 2 lakhs
- Where total amount of deposits from its members is more than Rs. 2 Cr but less than Rs. 20 Cr- Rs. 7.50 lakhs
- Where total amount of deposits from its members is more than 20 Cr but less than Rs. 50 Cr- Rs. 12 lakhs
- Where total amount of deposits from its members is more than Rs. 50 Cr- Rs. 15 lakhs
Interest rates of loans
The interest charged on any loan given by a Nidhi company shall not exceed 7.5% above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method.
General restrictions or prohibitions
Similar to a NBFC, there are certain restrictions or prohibitions on Nidhi companies as well.
Some of the major restrictions or prohibitions of a Nidhi company are that it shall not:
- carry on the business of chit fund, hire-purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate;
- open any current account with its members;
- accept deposits from or lend to any person, other than its members;
- carry on the business other than the business of borrowing or lending in its own name;
- take deposits or lend money to any body corporate;
- issue of advertisements in any form soliciting deposits;
- pay brokerage in order to mobilize deposits from members or for deployment of funds or for granting loans
Compliances to be made by Nidhi companies
Nidhi companies shall be required to do the following compliances:
- Filing of return of statutory compliances in e-Form NDH-1– Within 90 days of the close of first F.Y. and where applicable, the second F.Y.
- Filing of non-compliance with the conditions mentioned w.r.t incorporation of a Nidhi company such as minimum no. of members, Net Owned Funds etc. in e-Form NDH-2– Within 30 days of the close of first F.Y.
- Filing of half-yearly return in e-Form NDH-3– Within 30 days of the conclusion of each half year.
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