Nidhi Rules.pdf

By
CS Sejal Toshniwal (ACS, B.Com)
Sejal Toshniwal & Associates
Company Secretaries

Nidhi means a company which has been incorporated as a Nidhi with the
object of cultivating the habit of thrift and saving amongst its members,
receiving deposits from, and lending to, its members only, for their mutual
benefit, and which complies with the rules made by the central
Government for regulation of such class of companies.
The object of the company shall be receiving deposits from and lending to
its members only for their mutual benefits.
Nidhi companies are governed by Nidhi Rules, 2014. They are
incorporated in the nature of Public Limited Company and hence they have
to comply with two set of norms, one of Public limited company as per
Companies Act, 2013 and another is Nidhi rules, 2014. Further the working
of Nidhi Companies is governed by the Ministry of Corporate Affairs and
Registrar of Companies.
2
CS Sejal Toshniwal (+91 9420780887)

Nidhi is a public company
Minimum share capital of Ten Lakhs
Nidhi Cannot issue Preference Shares
3

Every Nidhi shall, within a period of one year from the commencement of
these rules, ensure that it has—
(a) not less than two hundred members;
(b) Net Owned Funds of ten lakh rupees or more;
Net Owned Funds = Paid up share Capital + Free Reserves – accumulated Losses -
intangible loses
(c) unencumbered term deposits of not less than ten per cent of the outstanding
deposits as specified in rule 14; and
(d) ratio of Net Owned Funds to deposits of not more than 1:20
i.e. Company cannot accept deposit more than 20x of the Net Owned Funds.
E.g. Net owned Funds = Rs.15,00,000 (as per last audited balance sheet)
Deposit Company can accept = Rs.3,00,00,000
4

Maintain Unencumbered term deposits of not less than 10% of the
outstanding deposits at the close of business on the last working day of the
second preceding month
(Unencumbered Term Deposits = Amount of Fixed Deposits created in
Scheduled Commercial Bank/Post Office in the Name of Nidhi Company)
E.g. FD in SBI bank = Rs.10,00,000
Deposits total as on 31st Jan = Rs.79,85,000
Percentage = 12.52% i.e. 13%
Provided that in cases of unforeseen commitments, temporary withdrawal
may be permitted with the prior approval of the Regional Director for the
purpose of repayment to depositors.
5

A Nidhi shall not admit a body corporate or trust as a member.
All the Members shall be individual persons.
Not less than 200 members shall be there by the end of 1st FY
A minor shall not be admitted as a member of Nidhi:
Provided that 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.
A member shall not transfer more than fifty percent of his shareholding (as
on the date of availing of loan or making of deposit) during the subsistence
of such loan or deposit, as the case may be.
6

All types of deposit holders shall be the shareholders of the Company holding
minimum 10 equity shares (savings account holder and a recurring deposit
account holder shall hold at least one equity share of rupees ten)
It shall not accept deposits exceeding twenty times of its Net Owned Funds
as per its last audited financial statements.
Fixed Deposits shall be accepted for minimum 6 months and maximum 60
months.
Recurring Deposits shall be accepted for minimum 12 months and maximum
60 months.
The maximum amount of balance in Saving Account shall not be more than
Rs.1 Lakhs
No current Account of the members has been opened.
7

All types of Loan holders shall be the shareholders/members of the Company.
All the loans provided shall be secured loans.
a. gold, silver and jewellery;
The maximum finance against the gold shall be up to 80%.
The maximum repayment period shall be 12 months
b. immovable property, and
The repayment period of loan shall not exceed 60 months.
The maximum finance can be up to 50%.
Also, this type of loan cannot exceed 50% of the total loan amount.
c. Fixed deposit receipts, National Savings Certificates, other Government
Securities and insurance policies.
The repayment period under this loan shall not exceed the period of Fixed
Deposit.
The maximum finance under this case will be up to the value of Fixed Deposit
under Nidhi Company
8

Maximum amount of Loans
The amount of deposits shall be calculated on the basis of the last audited annual
financial statements.
Nidhi has not made profits continuously in the three preceding financial
years, it shall not make any fresh loans exceeding fifty per cent of the
maximum amounts of loans specified in clauses (a), (b), (c) or (d).
TOTALAMOUNT OF
DEPOSITS*
LOAN AMOUNT (In Lacs)
2 crores 2
2 crores 20 crores 7.50
20 crores 50 crores 12
50 crores 15
9

The rate of interest for savings bank account shall not be more than 2%
above the rate of interest payable on saving bank account by nationalized
banks.
The rate of interest on Fixed deposit and Recurring deposit shall not be
more than maximum rate of interest which the NBFC can pay on their
public deposits as prescribed by RBI time to time. (11.00%)
The Rate of Interest to be charged on Loan shall not be more than 7.5%
above the highest rate of interest offered on deposits and rate of interest
charged was calculated on reducing balance method
10

• Rule 3(1)(aa) Branch means a place other than the registered office of
Nidhi”
It may open branches, within the state, only if it has earned net profits after
tax continuously during the preceding three years.
It may open up to 3 branches within district and to open branch outside the
district the permission of RD will be required.
No Nidhi shall open branches unless financial statement and annual return
(up to date) are filed with the Registrar.
A Nidhi shall not close any branch unless it publishes advertisement, fixes
a copy of such advertisement on the notice board of Nidhi Company and
gives intimation of such closure to the Registrar thereof.
11

The Company should not carry on the business of chit fund, hire purchase
finance, leasing finance, insurance or acquisition of securities issued by
any body-corporate.
issue preference shares, debentures or any other debt instrument by any
name or in any form whatsoever;
open any current account with its members;
The Company should not acquire Shares or Securities of any another
company
Is carry on any business other than the business of borrowing or lending in
its own name:
Provided that Nidhis which have adhered to all the provisions of these rules
may provide locker facilities on rent to its members subject to the rental
income from such facilities not exceeding twenty per cent of the gross income
of the Nidhi at any point of time during a financial year.
12

accept deposits from or lend to any person, other than its members;
pledge any of the assets lodged by its members as security;
take deposits from or lend money to any-body corporate;
enter into any partnership arrangement in its borrowing or lending
activities;
issue or cause to be issued any advertisement in any form for soliciting
deposit:
Provided that private circulation of the details of fixed deposit Schemes
among the members of the Nidhi carrying the words “for private
circulation to members only” shall not be considered to be an
advertisement for soliciting deposits.
pay any brokerage or incentive for mobilising deposits from members or
for deployment of funds or for granting loans.
raise loans from banks or financial institutions or any other source for the
purpose of advancing loans to members of Nidhi.
13

The Director shall be a member of Nidhi.
The Director of a Nidhi shall hold office for a term up to ten consecutive
years on the Board of Nidhi.
Reappointment after cooling period of 2 years
• Dividend upto 25% in a Financial Year can be given
14

Filing of NDH-1 with 90 days from the closure of first Financial Year.
Nidhi should state that they have complied all the Nidhi Rules as stated
under Rule 5 (Refer slide 3)
If sub-rule (a) and (d) [i.e. 200 members and ratio of NOF to Deposit of 1:20]
are not complied then company may ask for extension in filing of Form
NDH-1, by filing form NDH-2 within 30 days from the close of the first
financial year
The provisions of this rule shall not be applicable for the companies
incorporated as Nidhi on or after the commencement of the Nidhi
(Amendment) Rules, 2022.
15

NDH-3 should be filed every six Monthly with 30 days from end of 6
months i.e. before 30th Oct and before 30th April.
Nidhi should state that they have complied all the Nidhi Rules as stated
under Rule 5 (Refer slide 3)
Details of all Shareholders, deposit holders and loan account holders
should be inputed and reported to the RoC
• Form DPT-3 (Returns of Deposits accepted) (Due Date: 30th June)
• Annual General Meeting (Due Date: 30th Sept)
• Form AOC-4 and Form MGT-7 (Annual Returns of Audit) (Due Date:
30th Oct)
16

Introduced in 2019 under Nidhi Amendment Rule, to be effective from
15th Aug, 2019.
Further amended in 2022 Nidhi Amendment Rules, 2022, to be effective
from 19th April, 2022
Application to CG in Form NDH-4 for obtaining the status of Nidhi
Company stating that it has complied all rules as stated in Rule 5 (Refer
Slide 3)
Time Limit for filing application- within 60 days from one year of
incorporation.
Provided also that that in case a company does not comply with the
requirements of this rule, it shall not be allowed to file Form No. SH-7
(Notice to Registrar of any alteration of share capital) and Form PAS-3
(Return of Allotment)]
17

Provided also that no company, which has not complied with the requirements of
this rule, or fails to comply with such requirement on or after the commencement of
the Nidhi (Amendment) Rules, 2022, or in case the application submitted by the
company in Form NDH-4 is or has been rejected by the Central Government, shall
raise any deposit from its members or provide any loan to its members under
the provisions of these rules from the date of such non-compliance, or from the
date of the commencement of the above said rules, or the date of rejection of
the application in Form NDH-4, whichever is later.
Provided also that if any deposit raised by a company after the date of non-
compliance, or the date of commencement of the above said rules, or the date of
rejection of the application in Form NDH-4, whichever is later as referred to in the
fourth proviso shall be deemed to have been raised in pursuance of Chapter V
(i.e Sec 73 of Companies Act, 2013) of the Act, and shall be subject to all the
requirements under that Chapter, or under any other provisions of the Act or the
rules made thereunder, as the case may be.
Provided also that nothing in this rule shall apply to companies incorporated as
Nidhi on or after the commencement of the above said rules.”
18

Continuous losses
Drop down of Net Worth Fund
Ultra Vires act
Unlawful business Activities
Non fulfillment of Nidhi Rules and provisions of the Act
Qualification by Auditor
Illegal business module and sometimes unlawful
Any many more
19

Well compliance
Prompt Return Filings
Well documentations
Proper recording
Inspection of Department
Delayed Filing
Avoid penalties
Avoided Proceedings
Court Matters
Any many more based on case to case
20

New companies incorporated after 19th April, 2022 shall apply, in Form NDH-
4, within a period of one hundred twenty days of its incorporation for
declaration as Nidhi, if it fulfils the following conditions, namely:-
it has not less than two hundred members; and
it has Net Owned Funds of twenty lakh rupees or more.
The company shall also attach, alongwith Form NDH-4, the declaration with
regard to fulfilment of fit and proper person criteria, as per this sub-rule, by all
the promoters and directors of the company
CG to convey its decision within 45 days of application. In case no reply is
received from CG then NDH-4 shall be deemed to be approved
The decision of central Government shall be filed with Form INC-20Aand
Nidhi shall commence its business only once the decision of the Central
Government approving its application is obtained
In case a company does not comply with the requirements of sub- rule (1) of
this rule, it shall not be allowed to file Form No. SH-7 (Notice to Registrar of
any alteration of share capital) and Form PAS-3 (Return of allotment).
The provisions of this rule shall not be applicable to a public company
incorporated under the Act before the date of commencement of them Nidhi
(Amendment) Rules, 2022.
21

22

CS Sejal Toshniwal
Sejal Toshniwal Associates
Company Secretaries
Email Id: cssejaltoshniwal@gmail.com
Contact: 9420780887

Nidhi Rules.pdf

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