In a nation like India, where saving money is the people's top priority, the Nidhi Company Finance Serve a significant function. As a member of Nidhi Companies, it is their job to accept deposits and make loans.

The title for the name ‘Nidhi Company Finance’ came from the Hindi word ‘Nidhi’, meaning treasure. They follow the Companies Act 2013 and are regulated by the Ministry of Corporate Affairs in conjunction with the Reserve Bank of India. They have been formed mainly to encourage people to invest in their savings and are called mutual benefit societies. 

• They have been established to teach their members the habit of saving and investing correctly. 
• Members can deposit and accept loans from these mutual benefit institutions. Hence, they are considered a secure means of investment.
• As investing and financial sectors get increasingly complex, small families and members of rural populations need help to invest their hard-earned money. It is to assist such households that the concept of Nidhi Company was introduced. 
• While this business structure is more prevalent in South India, they have sprung up all over India thanks to their ease of working.

Regulations Nidhi Company Finance

The Ministry of Corporate Affairs regulates Nidhi Company Finance under section 20A of the Companies Act, 1956. Their primary source of funding comes from deposits made by members. The company grants loans at reasonably low rates for house construction, repairs, and maintenance to provide benefits to members.  

Basic Guidelines of a Nidhi Company

• Nidhi Company Finance is listed as a Public Limited Company.
• The objectives of the Nidhi Company are to encourage saving, receive deposits and lend money to members for mutual benefit. 
•  Nidhi Companies must acquire at least 200 members within one year of its founding.
• Further, within one year, they must possess ₹ 10 lac or more as deposits and the ratio of funds to deposits must not exceed 1:20. 
• Must have a minimum equity share capital of rupees five lakhs. 
• Every company following the scheme should have the words ‘Nidhi Limited’ in its name.
• Within 90 days of the end of the first financial year since its founding, the Nidhi Company must file for a return of compliance as mentioned in Form NDH-1, along with the required fees.
• Failure to comply with the rules, as mentioned earlier, will result in the Nidhi Company being unable to receive deposits and liable to legal repercussions. 
• Every Nidhi Company may issue shares for a value not less than ten rupees each but shall not levy any added service charge.  
• Each deposit holder may receive ten shares or equity worth one hundred rupees.
• The maximum balance in a savings account should be at most one lakh rupees

Deposit Conditions

1. The number of deposits accepted must be at most 20 % of their net owned funds.
2. The fixed deposit may be accepted for a minimum of 6 and a maximum of 60 Months, while the time period for recurring deposits may range between 12 to 60 months.
3. The interest rate can be at most 2 % of the rate offered by a national bank. 

Provisions for Loan

1. While there are provisions for loans within the Nidhi scheme’s framework, the interest levied on such loans shall amount to at least the rate of interest as prescribed by the RBI. 
2. Sometimes, the company provides a guarantee or security for procuring the loan. At the same time, the credit is delivered to a Subsidiary Company from the financial institution. 
3. The approval of the Ministry of Corporate Affairs:  Department of commerce of either the Central or State Government is required before giving out any loan. 
4. Loans may be given out only to members of the Start a eNidhi and may not be given to Corporate bodies. 
5. There are limits on the amount that can be provided. 
6. A maximum of two lakh rupees may be issued if the total deposits of the Nidhi come below two Crore rupees.
7.  Loans may be handed out based on some form of security, such as gold, silver or other types of valuable jewellery.  
8. The repayment period should be one year at maximum. 
9. The loan against an immovable property such as a house or a fixed asset should be at most fifty per cent of the board’s approved rate. The repayment period for such loans should be within the time frame of seven years. 
10. The maturity date of securities like fixed deposits, savings certificates and insurance policies should be the loan period or one year. 
11. For loans against fixed deposits, the credit period should stay within the expiry period of the fixed deposits.

Loans Under Nidhi Company

1. Amount ₹2 lakh – For a deposit of ₹2 crore
2. Amount ₹7.5 lakh – Deposit between ₹2 and 20 crores
3. Amount ₹12 lakh – Deposit between ₹20 and 50 crores
4. Amount ₹15 lakh – Deposit greater than ₹50 crore

Conclusion 

We hope we have provided enough information to answer your inquiry; however, if you require additional assistance, please do not hesitate to comment.

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