Easy to start NBFC Company in India

Nidhi Company is a type of Non-Banking Financial Company (NBFC). It is formed to borrow and lend money to its members. It inculcates the habit of saving among its members and works on the principle of mutual benefit. Nidhi Company isn’t required to receive the license from Reserve Bank of India (RBI), hence it is easy to form. It is registered as a public company and should have “Nidhi Limited” as the last words of its name.

Activities Prohibited in a Nidhi Company

Nidhi Company can’t deal with chit funds, hire-purchase finance, leasing finance, insurance or securities business. It is strictly prohibited from accepting deposits from or lending funds to, any other person except members. Also, it can’t advertise itself to ask for any deposits.

Documents required for registration

There are not required too many documents for Incorporating a Nidhi Company. Noted that you have to minimum of seven members is required to start a Nidhi Company out of which three members must be the directors of the company.

The Required Documents are as follows:

  1. All Members Pan Card
  2. All Members Aadhaar Card
  3. All Members Photo
  4. All Members Current Bank Statement (Not Older Than 2 Months)
  5. Company Address Proof (Electricity Bill / Gas Bill / Telephone Bill / Mobile Bill)
  6. All Members Current Mobile Bill (If not have any Bank Account)

Conditions to be fulfilled for getting ‘Nidhi’ status

Within one year of its registration

Nidhi Company should have minimum 200 members within one year from commencement

Also, the net owned funds should be 10 lakh rupees or more. Net owned funds = Equity share capital + free reserves (-) accumulated losses (-) intangible assets

Unencumbered term deposits must be 10% or higher of the outstanding deposits

The ratio of net owned funds to deposits shouldn’t be more than 1:20

If Nidhi Company satisfies all above conditions, it should file NDH-1 along with prescribed fees within 90 days from the end of the first financial year after incorporation. The form must be duly certified by practicing CA/ CS/ CWA.

Extension of another financial year can be availed upon submission of NDH-2 to the Regional Director within 30 days from the end of the first financial year.

If even after the second financial year, it doesn’t fulfil the requirements, it can’t accept deposits till it complies with the provisions, and also penalty will be imposed.

Benefits of Nidhi Company:

  1. Very Easy to formation

  • Requires only 7 persons where 3 will be appointed as Director.
  • Less documentation to do.
  • Simple Registration process.
  • Hardly take 10 to 15 days to get it register.

Nidhi company registration is very simple and the level of complexity as compared to other types of finance companies like NBFC is minimal in Nidhi Company.

  1. Cost-Efficient Registration

Registering Nidhi Company comes with a pocket-friendly cost. The minimum capital requirement for registration of Nidhi Company is Rs 5,00, 000 lakh which you can invest within 2 months after getting your Nidhi Company registered.

For registration of Nidhi Limited, you can reach at www.sujataassociates.com where you will find an economical price for Nidhi registration and get the registration of Nidhi company at a very cheaper price.

  1. No RBI Regulations – less compliance

Nidhi Company by its nature of activity comes under the category of NBFC but does not require RBI approval. These companies follow Nidhi Rules, 2014 issued in respect of the activity and working of the company. RBI has exempted Nidhi Company from following stringent compliances so you don’t need to be in rush-n- hush as RBI will not bother if you starting a Nidhi Company in India.

  1. More Certainty in Nidhi company

In India, everyone likes to do the savings for six years old child to sixty years old man. And, the main objective of Nidhi company is to promote the habit of saving amongst its member which means it is a certain and going concern business as the members will not stop savings anytime.

  1. Less level of Risk – Non-payment loans

It is very clear that Nidhi Company can accept deposits and provide loans to its members only according to the Nidhi Rules, 2014 which means the risk of non-repayment of loans is less as compared to other finance businesses. It is the safest route for lending loans and the loans given to members are at very low rates in comparison with other providers which again brings greater savings amongst members.

  1. Net owned fund- Invest one get twenty

Net-owned fund means the amount of capital invested by the owner in its business for raising funds. The net owned fund ratio of Nidhi Company is 1:20, which means you invest one rupee and raise the deposit of twenty rupees.

  • Growth through innovation/creativity:
    Rather than be constrained by ideas for new products, services and new markets coming from just a few people, a Thinking Corporation can tap into the employees.
  • Increased profits:
    The corporation will experience an increase in profits due to savings in operating costs as well as sales from new products, services and ventures.
  • Higher business values:
    The link between profits and business value means that the moment a corporation creates a new sustainable level of profit, the business value is adjusted accordingly.
  • Lower staff turnover:
    This, combined with the culture that must exist for innovation and creativity to flourish, means that new employees will be attracted to the organization.

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