Expert Assistance

A Nidhi Company, often referred to as a mutual benefit society, is a type of Non-Banking Financial Company (NBFC) that operates with a unique, member-centric model. Unlike other NBFCs, it does not require a license from the Reserve Bank of India (RBI) and is governed by the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013, and the Nidhi Rules, 2014. The core business of a Nidhi company is to accept deposits from and lend to its members only.

 

Why Choose a Nidhi Company? 

• No RBI License Required: This is the most significant advantage. While it falls under the NBFC category, a Nidhi company is exempt from the stringent regulations and licensing requirements of the RBI, making its formation and operation simpler.

• Encourages Savings: The primary objective of a Nidhi company is to cultivate the habit of thrift and savings among its members by providing a secure and accessible platform for financial transactions.

• Lower Capital Requirement: A Nidhi company can be incorporated with a minimum paid-up equity share capital of just ₹10 lakhs, which is significantly lower than the capital required for other types of NBFCs.

• Simple and Cost-Effective: The registration process is less complex and more affordable compared to registering other financial institutions.

• Limited Liability: As a public limited company, the personal liability of the members is limited to their shareholding, protecting their individual assets.

• Mutual Benefit: The company operates on a mutual benefit principle, where all financial activities are restricted to its members, ensuring transparency and reducing the risk of non-repayment of loans.

 

The Complete Registration Process 

The registration of a Nidhi company is a digital process completed through the MCA portal.

 

Step 1: Fulfill Pre-Incorporation Requirements

• Members: A minimum of seven members are required.

• Directors: A minimum of three directors are required, all of whom must be members.

• Paid-up Capital: The company must have a minimum paid-up equity share capital of ₹10 lakhs.

 

Step 2: Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN)

• All proposed directors and members must acquire a DSC for e-filing.

• Each director must have a unique DIN.

 

Step 3: Reserve a Unique Name

• The name must be unique and must end with the words "Nidhi Limited."

• The name can be reserved through the RUN (Reserve Unique Name) service on the MCA portal.

 

Step 4: Draft Legal Documents

• Prepare the Memorandum of Association (MoA) and Articles of Association (AoA). These documents must clearly state that the company's objective is to "cultivate the habit of thrift and savings among its members" and to receive deposits from and lend to members for their mutual benefit.

 

Step 5: File for Incorporation

• File the integrated SPICe+ form electronically with the Registrar of Companies (RoC). This form also includes applications for the company's PAN, TAN, and other registrations.

 

Step 6: Obtain Certificate of Incorporation (CoI)

• Once the RoC approves the application, it issues the Certificate of Incorporation (CoI), which officially establishes the company and provides its unique Corporate Identification Number (CIN).

 

Step 7: Post-Incorporation Compliance

• Open a Bank Account: Open a corporate bank account with the company's name.

• Achieve Minimum Members: Within one year of incorporation, the company must have a minimum of 200 members.

• Net Owned Funds (NOF): The NOF must be at least ₹20 lakhs within 120 days of incorporation.

• Filing of NDH-4: A crucial form (NDH-4) must be filed within 120 days of incorporation to declare the company as a Nidhi company to the Central Government.

• Maintain Ratios: The ratio of Net Owned Funds to deposits should not be more than 1:20.

​

Key Benefits

• No RBI License Required: Unlike other Non-Banking Financial Companies (NBFCs), a Nidhi Company is exempt from the stringent and often complex licensing requirements of the Reserve Bank of India (RBI). This makes the registration and operation process much simpler and faster.

• Low Capital Requirement: You can start a Nidhi Company with a minimum paid-up capital of only ₹10 lakhs, which is significantly lower than the capital required for other types of NBFCs. This makes it an accessible option for smaller groups and communities.

• Encourages Savings: The very foundation of a Nidhi company is to cultivate a habit of thrift and savings among its members. It provides a secure and trusted platform for members to deposit their money and earn a return.

• Limited Liability: As a public limited company, the members' liability is limited to their shareholding. This means their personal assets are protected from the company's debts or financial losses.

• Simplified Compliance: Nidhi companies are governed by the Ministry of Corporate Affairs (MCA) under the Nidhi Rules, 2014, which are less stringent than the regulations for other NBFCs. This results in a simpler and more cost-effective compliance process.

• Mutual Benefit and Security: The company operates on a mutual benefit principle, where deposits are accepted and loans are provided only to its members. This closed-group system reduces the risk of loan defaults and external interference, creating a safer financial environment for its members.