NIDHI COMPANY

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NIDHI
COMPANY

“NIDHI COMPANY ”
A Nidhi company is a Limited Company to be incorporated under
Companies Act -2013
A Nidhi company shall be a Public Limited Company;
It shall have a minimum paid up equity share capital of Rs.5,00,000/-
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It shall have a Minimum number of Member 7 (Seven) ( for
Incorporation)
It shall have a Minimum Number of Director is 3 (Three )
It shall have the words ‘Nidhi Limited’ as part of its name
(For E G : CSWA NIDHI LIMITED )
“NIDHI COMPANY ”

Receiving deposits only from member of Nidhi Company
Lending to its only from members of Nidhi Company for their mutual
benefits;
(Brief : The object of the company shall be cultivating the habit of thrift and
savings amongst its members)
Object of Nidhi Company

RBI Rule
Nidhi’s come under one class of NBFCs,
RBI is empowered to issue directions to them in matters relating to their
deposit acceptance activities
RBI does not have any specified regulatory framework for Nidhi’s.
(RBI has exempted the notified Nidhi’s from the core provisions of the RBI Act and other
directions applicable to NBFCs)

Type of Nidhi Business
Nidhi,
Permanent Fund,
Benefit Funds,
Mutual Benefit Funds and
Mutual Benefit Company.
Nidhi company known under different names such :

AFTER INCORPORATION OF NIDHI COMPANY :
 File MCA E form INC-22 With Register of Companies (ROC) if you have not
already submitted documents for proving Registered office with Registrar of
Companies.
 File MCA E form ADT-1 With Register of Companies (ROC) for Appointment of
First Auditor with Registrar of Companies.
 File MCA E form INC 20A With Register of Companies (ROC) for Commencement
of Business

Certificate of Commencement of Business
 Every subscriber to the Memorandum of Association (MOA) has paid the value of
the shares agreed to be taken by him on the date of making of such declaration (
MOA Subscription).
 File MCA E form INC 20A with Bank statement as Proof of Amount of Capital
brought by each Shareholders of the Company.
 A declaration is filed by a director within a period of 180 (one hundred and eighty)
days of the date of incorporation of the company.
 The contents of the said form shall be verified by a Company Secretary (CS) or a
Chartered Accountant (CA) or a Cost Accountant (CMA) in practice.

Certificate of Commencement of Business
If any default is made in complying with the requirements of this section, the company
shall be liable to a penalty of fifty thousand rupees and every officer who is in default
shall be liable to a penalty of one thousand rupees for each day during which such
default continues but not exceeding an amount of one lakh rupees.
Where no declaration has been filed with the Registrar under clause (a) of sub-section (1)
within a period of one hundred and eighty days of the date of incorporation of the
company and the Registrar has reasonable cause to believe that the company is not
carrying on any business or operations, he may, without prejudice to the provisions of
sub-section (2), initiate action for the removal of the name of the company from the
register of companies under Chapter XVIII.

Display its name in legible letters in its registered office and have its name engraved on the
seal in legible characters.
Name, Address of registered office, CIN Number, Telephone Number, Fax Number, E-Mail
Id Or Website address must be printed on all business letters, billheads, letter papers and in
all notices and other official publications and have its name printed on hundies, promissory
notes, bills of exchange and such other documents.
Every document or letter of the company where the name of the Director is mentioned the
designation as to whether he is a Chairman/ Managing Director/ Whole time Director/
Director and the DIN allotted to him should be mentioned below his name.
Corporate Compliance

After one year from the commencement of these rules, ensure that it has—
Its should ensure that Minimum number of Members should be 200;
Net owned funds shall be Rs.10,00,000/- or more
(‘Net owned funds’ means the aggregate of paid up equity share capital and free
reserves as reduced by the accumulated and intangible assets appearing in the
last audited balance sheet);

Ratio of net owned funds to deposit shall be not more than 1:20;
( For Ex : Capital Rs.10,00,000 and No Reserves etc…)
(Deposit is Rs. 10,00,000 * 20 = 20,000,000)
Unencumbered term deposits of not less than 10% of the outstanding
deposits as specified in Rule 14;
REQUIREMENT AFTER INCORPORATION OF NIDHI COMPANY :

Nidhi Company shall not Carry on the business of:
 Chit Fund,
 Hire Purchase Finance,
 Leasing Finance,
 Insurance or
 Acquisition of Securities issued by anybody corporate;
RESTRICTIONS FOR NIDHI COMPANY :

 Preference Shares,
 Debentures or
 Any Other Debt Instrument by any name or
in any form whatsoever;
Nidhi company shall not Issue of:

Nidhi company shall not Open
any Current Account with its members;

 Carry on any business other than the business of borrowing or
lending in its own name;
 Accept Deposits from or lend to any person, other than its
members;
 Pledge any of the assets lodged by its members as security;
Nidhi Company shall not

• Take Deposits from or lend money to anybody corporate;
• Enter into any Partnership Arrangement in its borrowing or
lending activities;
Nidhi Company shall not :

 Issue or cause to be issued any advertisement in any form for
soliciting deposit;
 Pay any brokerage or incentive for mobilizing deposits from
members or for deployment of funds or the granting loans.
Nidhi Company shall not :

 Purchase of securities or
 Control the composition of the Board of Directors of any other
company in any manner whatsoever or
 Enter into any arrangement for the change of its management,
unless it has passed a special resolution in its general meeting and
also obtained the previous approval of the Regional Director
having jurisdiction over Nidhi;
Nidhi company shall not Acquire another company by;

Nidhi company may provide locker facilities on rent to its members
Rental income from such facilities shall not exceeding 20% (twenty per
cent) of the gross income of the Nidhi at any point of time during a
financial year.
LOCKER FACILITY FOR NIDHI COMPANY :

MEMBERSHIP IN NIDHI COMPANY
A Nidhi member shall not be a body corporate or trust.
Every Nidhi shall ensure that its membership is not reduced to less than
200 members at any time.
A minor shall not be admitted as a member of Nidhi.
(But deposits may be accepted in the name of a minor, if they are made by
the natural or legal guardian who is a member of Nidhi.)

No service charge shall be levied for issue of shares.
Every Nidhi shall allot to each deposit holder at least a minimum of 10
equity shares or shares equivalent to Rs.100/-.
A savings account holder and a recurring deposit account holder shall
acquire at least 10 equity shares of Rs.10/- each .

In case of loan Every Nidhi shall allot at least 1 equity shares of Rs.10/-.
(If a person has a loan in Nidhi and wants to be a deposit holder, then he
need to be allotted 9 equity shares of Rs.10/- each and If a person is a
deposit holder, then need not be allotted any shares as he already holds
10 equity shares.

 Fixed Deposit
 Savings Deposit
 Recurring Deposit
TYPE OF DEPOSIT IN NIDHI COMPANY

MAXIMUM DEPOSIT = NET OWNED FUND * 20
NET OWNED FUND = (PAID-UP CAPITAL + FREE RESERVE ) –
ACCUMULATED LOSSES & INTANGIBLE ASSETS
ACCEPTANCE OF DEPOSITS IN NIDHI COMPANY

A Nidhi shall not accept deposits exceeding 20 times of its Net Owned Assets
as per last audited financial statements.
(In the current situation Company Paid-up Capital is Rs. 10 lacs, so we can
accept deposits upto 2 Crores. )
Deposits should be accepted in Cheques.
Company can accept any amount as Deposits.

Fixed Deposits
The Fixed deposits shall be accepted for a Minimum period of 6 months and a
Maximum period of 60 months.
Recurring Deposits
Recurring deposits shall be accepted for a Minimum period of 12 months and a
Maximum period of 60 months.
(In case of recurring deposits relating to mortgage loans, the maximum period of recurring deposits
shall correspond to the repayment period of such loans granted by Nidhi.)

The maximum balance in a savings deposit account at any given time
qualifying for interest shall not exceed Rs.1,00,000/- and the interest shall not
exceed 2% above the rate of interest payable to savings bank account by
nationalized banks. (Max- 6%, Min- 3.5%).
Interest for fixed and recurring deposits shall be at a rate not exceeding the
maximum rate of interest prescribed by RBI which the NBFC can pay on their
public deposits. (Max- 12.5%, Min- 5%).

Every Nidhi shall invest and continue to keep invested, in unencumbered term
deposits with a scheduled commercial bank or post office deposits in its own
name an amount which shall not be less than 10% of the deposits outstanding
at the close of the business on the last working day of the second preceding
month.
In case of unforeseen commitments, temporary withdrawal may be permitted
with the prior approval of the Regional Director for the purpose of repayment
to depositors, subject to such conditions and time limit which may be specified
by the Regional Director to ensure restoration of the prescribed limit of 10%

a) Gold Loan
b) Mortgage Loan
c) Loan against Deposit Receipt
TYPE OF LOAN IN NIDHI COMPANY

A Nidhi shall provide loans only to its members.

Deposit from Members Maximum Loan Amount to
a member
Less than Rs.2 crores; Rs.2,00,000/-
Rs.2 crores but less than Rs.20 crores; Rs.7,50,000/-
Rs.25 crores but less than Rs.50 crores Rs.12,00,000/-
more than Rs.50 crores. Rs.15,00,000/-
The loans given to a member shall be subject to the following Limits:

Loans to the members shall be given against the securities of gold, silver and
jewellery and immovable property.
Repayment period of such loan shall not exceed one year in case of gold, silver
and jewellery.
SECURITIES IN NIDHI COMPANY

In case of immovable property the loan shall not exceed 50% of the value of
the property offered as security and the period of repayment of such loan
shall not exceed 7 years.
Loan may be given against the fixed deposit receipts, National Savings
Certificates and other Government securities and insurance policies

The rate of interest to be charged on any loan shall not exceed
7.5% above the highest rate of interest offered on deposits by
Nidhi and shall be calculated on reducing balance method.

A Nidhi shall not declare dividend exceeding 25% or Such higher amount as
may be specifically approved by the Regional Director for reasons to be
recorded in writing and further subject to the following conditions-
An equal amount is transferred to General Reserve;
There has been no default in repayment of matured deposits and interest; and
It has complied with all the rules applicable to Nidhis.
DIVIDEND IN NIDHI COMPANY

The Director shall be a MEMBER of Nidhi.
He shall hold office for a term up to 10 consecutive years on the Board.
He shall be eligible for re-appointment only after the expiration of 2 years
ceasing to be a director.
DIRECTOR IN NIDHI COMPANY

Where the tenure of any director in any case had already been extended by the
Central Government it shall terminate on expiry of such extended tenure.
The person to be appointed as a Director shall comply with the requirements
of Section 152(4) of the Act and shall not have been disqualified as provided
in Section 164 of the Act.
DIRECTOR IN NIDHI COMPANY

The tenure of Auditor is five consecutive years.
No auditor or audit firm as auditor shall be appointed for more than
two terms of five consecutive years.
The auditor shall be eligible for subsequent appointment after
the expiration of two years from the completion of his term
AUDITOR IN NIDHI COMPANY

The CS/CA (Chartered Accountant / Company Secretary ) of the company
shall furnish a Certificate every year to the effect that the company has
complied with all the provision contained in the rules and such certificates
shall be annexed to the audit report and in case of non compliance he shall
specifically state the rules which have not been complied with.
AUDITOR IN NIDHI COMPANY

A Nidhi may open branches only if it has earned net profits after tax
continuously during the preceding three financial years.
The company may open up to 3 branches only within the district.
BRANCHES IN NIDHI COMPANY

If it proposes to open more than 3 branches within the district or any
branch outside the district, it shall obtain prior permission of the
Regional Director and intimation is to be given to the Registrar about
opening of every branch within 30 days of such opening.

Nidhi shall not open branches or collection centers or offices or deposit centers,
or by whatever name called outside the State where its registered office is
situated.
Further branches or collection centers or offices or deposit centers shall be
opened unless financial statement and annual return are filed with the
Registrar.

Prepared By SAVEESH.K.V. FCS
Managing Partner of CSWA : CA & CS
CSWA Bhavan , II nd Floor, N.T.A. Complex (Near Mankavu Bridge ) , Mini Bye Pass Road, Mankavu,
Calicut 673007, Phone : 0495 -233 14 15 Mob : : +91 9567 49 43 97 , +91 7558 02 71 40

NIDHI COMPANY

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