If you are also someone who wants to know more about the difference between Nidhi Finance Bank and cooperative society then read on!
What is Nidhi Finance Bank And Co-Operative Society?
A Nidhi Finance Bank and Co-operative Society, also known as a Nidhi Company, is a unique financial institution in India. It’s set up under the Companies Act of 2013 to encourage savings among its members. Unlike regular banks, Nidhi entities operate for the benefit of their members, not shareholders. They focus on borrowing and lending money exclusively among their members, promoting community-driven financial services. Membership is limited to individuals meeting specific criteria, and members contribute funds through savings schemes like fixed deposits. These funds are then used to provide loans for various purposes, like housing and education. Regulated by the Ministry of Corporate Affairs, Nidhi institutions must follow strict rules governing their operations and management. While they offer essential financial services, they’re not allowed to perform typical banking activities like issuing credit cards.
Nidhi Finance Bank And Co-Operative Society is essential for fostering financial inclusion and providing accessible credit facilities to members, particularly those from lower-income backgrounds. By encouraging thrift and savings habits, they play a crucial role in empowering communities financially. Despite their limitations, such as being unable to offer current accounts, these institutions serve as valuable pillars of community-based financial support.
Features of Nidhi Finance Bank
You must learn the fundamentals of Nidhi Finance Bank And Co-Operative Society before we can discuss more it.
- Nidhi Finance Banks and Cooperative Societies, also known as Nidhi Companies, prioritise promoting savings habits among members.
- They encourage financial literacy and educate members on the importance of saving money and using it wisely.
- The registration process for a Nidhi Company in India is simple and accessible, with minimal requirements and formalities to complete.
- Nidhi Companies restrict their business dealings exclusively to their members, fostering a sense of community and trust within the organization.
- Transactions and services are only provided to registered members, enhancing efficiency and ensuring resources benefit those directly involved.
- For incorporation, Nidhi Companies need a minimum capital of five lakhs and at least seven members, ensuring financial stability and credibility.
Benefits of Registering as Nidhi Company
A variety of benefits are available for those who register as Nidhi companies. The following benefits can be summed up:
- When a corporation is registered as a Nidhi Finance Bank, it acquires legal existence. As an officially registered Mutual Benefit Society, it has a separate legal existence. The corporation is a distinct legal person from its members, and as such, it has the right to acquire and dispose of property under its own name.
- The company’s members’ responsibilities will be constrained by the sums they have contributed or invested. Only their portion of the company will be held liable for the members. It is not possible to use a member’s personal obligations to pay off a company’s debts.
- Funds are readily available, and members can draw from their own funds at lower interest rates.
Examples of Nidhi companies
The key distinctions between Nidhi Companies and Co-operative Societies lie in their legal standing, governance structure, perceived reputation, regulatory oversight, objectives, geographical reach, and membership criteria. Below mentioned are some of examples of Nidhi companies registered in India:
- Alandur Praja Sahya Saswatha Nidhi Limited
- Sriman Madhwa Sidhantaonnahini Permanent Nidhi Limited
- Paraspara Sahaya Nidhi (Perambur) Ltd
- Shenoy Nagar Saswatha Nidhi Ltd
- Jayabharath Benefit Fund Limited
- Canara Nidhi Limited
- Mini Muthoottu Nidhi Kerala Limited
- Varthaka Mandal Nidhi Ltd
What Is a Cooperative Society?
Cooperative societies are profit-driven organisations that seek to increase the marketability of the goods produced by labour-intensive industries like agriculture.
The Multi-State Co-operative Societies Act, which provided for a democratic and independent functioning of the Co-operatives, was passed by the Government of India in 2002 based on the recommendations of the Mirdha Committee & Model Co-operative Societies Act. The key components of cooperative societies in India are discussed in this article.
A cooperative society is usually a voluntarily organised group of people who come together with the goal of collaborating and advancing their economic interests. These societies operate under the tenets of mutual and self-help. The main objective is to support the members.
In a cooperative society, nobody departs without making money. People that share an interest come forward as a group, pool their resources, use them as effectively as possible, and gain something mutually beneficial from it. It is a group of individuals who voluntarily pool their resources for the benefit of the group’s members. A cooperative organisation is established to encourage members to be frugal, self-reliant, and supportive of one another. You Can Know more About the Nidhi Finance Bank Online Process!
The Multi-State Co-operative Societies Act of 2002 or the Co-operative Societies Act of the relevant state may both govern cooperative societies. The co-operative societies Act of that particular State governs the societies in that State whose main goal is to serve the interests of its members.
While the Multi-State Co-operative Societies Act of 2002 governs organisations whose main goal is to represent the interests of their members across many states. The two key organisations promoting the cooperative movement in India are the National Co-operative Union of India (NCUI) and the National Co-operative Development Corporation (NCDC).
Features of a Cooperative Society
- The association is voluntary, and as such, so is membership. An individual has the freedom to join a cooperative organisation and to leave at any moment. Membership is open to everyone, regardless of caste, gender, or religion.
- The cooperative society must register in order to operate. A separate legal entity from the society is the cooperative society.
- It is unaffected by the joining or leaving of its members.
- The cooperative society’s members have a limited amount of obligation. Liability is capped at the amount that members contributed.
- A governing committee that has been elected has decision-making authority. Voting privileges allow members to choose the individuals who will make up the managing committee.
- The mutual aid and benefit principle underlies the operation of the cooperative society. As a result, the principle of service governs how it operates. If there is a surplus, it is dispersed to the members as a dividend in accordance with the society’s by laws.
Benefits of Cooperative Society
- The creation of a cooperative organisation is simpler than starting a Nidhi Finance Bank . Any ten individuals can voluntarily create an association and file for registration as a cooperative with the Registrar of Cooperatives. Additionally, there are no drawn-out or difficult legal procedures involved in the formation of a cooperative society.
- Members’ liability in cooperative organisations is capped at the amount of their capital, similar to business forms of ownership.
- An independent legal entity governs a cooperative group. A cooperative society can continue to exist regardless of a member’s demise, insolvency, retirement, etc.
- The core element of cooperatives is mutual and self-help. Cooperatives encourage a sense of community among their members and instil moral principles in them so they can live better.
- Cooperative societies allow anybody to join, regardless of caste, colour, creed, or economic standing. The number of participants has no upper bound.
- A cooperative society is exempt from income tax and surcharge on its earnings up to a specified amount, unlike the other three types of corporate ownership. Additionally, it is exempt from registration fees and stamp duties.
- Cooperatives have been adopted by the government as a powerful tool for socio-economic transformation. Therefore, in order to increase the effectiveness of the cooperative societies’ operations, the government provides a variety of grants, loans, and financial aid.
- The governing committee, officially chosen by the members on the premise of “one member, one vote,” is in charge of running the cooperative society, regardless of how many shares each member owns. Cooperative societies do not permit the use of proxies. Therefore, cooperative management is democratic.
Examples of Cooperative Society
- National Co-operative Land Development Banks Federation Limited,
- National Federation of State Co-operative Banks Limited,
- National Co-operative Union of India Limited
- National Agricultural Co-operative Marketing Federation of India Limited
- National Co-operative Consumers Federation of India Limited
- National Federation of Co-operative Sugar Factories Limited
- National Federation of Industrial Co-operative Limited
- National Co-operative Housing Federation Limited
- Indian Farmers Fertiliser Co-operative Limited
- All India Federation of Co-operative Spinning Mills Limited
- All India Industrial Co-operative Banks Federation Limited
- National Co-operative Dairy Federation of India Limited
- National Heavy Engineering Co-operative Limited
- All India Handloom Fabrics Marketing Co-operative Society Limited
- National Federation of Urban Co-operative Banks and Credit Societies Limited
- Krishak Bharati Co-operative Limited, New Delhi
- National Federation of Fishermen’s Co-operative Limited
- National Federation of Labour Co-operative Limited
- National Co-operative Tobacco Grower’s Federation Limited
- Tribal Co-operative Marketing Development Federation of India Limited
- *Petrofils Co-operative Limited, Vadodara, Gujarat: Under Liquidation.
Nidhi Company vs Cooperative Society
Here is the detailed information about Nidhi Finance Bank And Co-Operative Society for you given in a table:
| Feature | Nidhi Company | Cooperative Society |
|---|---|---|
| Legal Structure | Governed by the Nidhi Rules, 2014 | Governed by the respective Cooperative Societies Act of the state |
| Membership | Limited to individuals | Open to individuals, institutions, and organizations |
| Objectives | Promote savings habits among members | Foster community development and mutual assistance |
| Activities | Limited to borrowing and lending amongst members | Wide range of activities including banking, agriculture, housing, and more |
| Regulation | Regulated by the Ministry of Corporate Affairs | Regulated by the respective state Cooperative Department or Registrar |
| Capital Requirements | Minimum capital requirement of five lakhs and at least seven members | Determined based on the requirements set by the Cooperative Societies Act |
| Profit Distribution | Profits are shared among members | Surplus may be distributed among members or reinvested for the benefit of the society |
| Governance | Managed by the Board of Directors | Governed by a Board of Directors or Managing Committee elected by members |
| Taxation | Subject to income tax as per the Income Tax Act | Generally exempt from income tax under certain conditions, but may be taxed on non-exempt income |
Conclusion
We hope that reading this article has given you deep insight into the differences between a Nidhi Finance Bank And Co-Operative Society. If you are someone looking for a Nidhi company registration or registration of a cooperative society, our legal professionals at Vakilsearch can be your best bet.
Frequently Asked Questions
What is the fundamental difference between a Nidhi Finance Bank and a Cooperative Society?
The fundamental difference between a Nidhi Finance Bank and a Cooperative Society is that a Nidhi Finance Bank is a non-banking financial company (NBFC), while a Cooperative Society is a type of banking institution. This means that Nidhi Finance Banks are regulated by the Reserve Bank of India (RBI), while Cooperative Societies are regulated by the Registrar of Cooperatives.
Are Nidhi Finance Banks and Cooperative Societies regulated by different authorities?
Yes, Nidhi Finance Banks are regulated by the Reserve Bank of India (RBI), while Cooperative Societies are regulated by the Registrar of Cooperatives.
Can you explain the ownership structure of Nidhi Finance Banks and Cooperative Societies?
Nidhi Finance Banks and Cooperative Societies are both owned by their members. This means that the members have a direct say in the running of the organization and are entitled to a share of the profits.
What types of financial services do Nidhi Finance Banks typically offer?
Nidhi Finance Banks typically offer a range of financial services to their members, including: Savings and deposit accounts Loans (personal, business, vehicle, etc.) Fixed deposits Recurring deposits Money transfer services Insurance products
How do Cooperative Societies function in terms of financial services?
Cooperative Societies offer a similar range of financial services to Nidhi Finance Banks, but they can also offer additional services to their members, such as: Agricultural credit Marketing and distribution of agricultural products Consumer goods supply Housing loans Educational loans Healthcare services
Are there any specific legal requirements for establishing a Nidhi Finance Bank or a Cooperative Society?
Yes, there are specific legal requirements for establishing a Nidhi Finance Bank or a Cooperative Society. For example, to establish a Nidhi Finance Bank, the following conditions must be met: The company must have a minimum of 200 members The minimum net owned funds of the company must be ₹10 lakh The company must not accept deposits from non-members The company must not lend money to non-members To establish a Cooperative Society, the following conditions must be met The society must have a minimum of 10 members The members must subscribe to the share capital of the society The society must be registered with the Registrar of Cooperatives.
What are the key objectives or purposes behind the formation of Nidhi Finance Banks?
The key objectives or purposes behind the formation of Nidhi Finance Banks are to: Encourage savings among members Provide financial assistance to members at reasonable interest rates Promote thrift and self-reliance among members.
Are there any notable differences in the governance and management of these two entities?
The governance and management of Nidhi Finance Banks and Cooperative Societies are similar in many ways. However, there are a few key differences: Nidhi Finance Banks are governed by a Board of Directors, which is elected by the members. Cooperative Societies are governed by a General Body, which is made up of all the members of the society Nidhi Finance Banks must comply with all the regulatory norms and guidelines issued by the RBI. Cooperative Societies must comply with the regulations issued by the Registrar of Cooperatives.
How do Nidhi Finance Banks and Cooperative Societies handle profit distribution among their members?
Nidhi Finance Banks and Cooperative Societies typically distribute their profits among their members in proportion to the number of shares they hold or the amount of business they transact with the organisation.
Can you provide examples of Nidhi Finance Banks and well-known Cooperative Societies in India?
Some examples of Nidhi Finance Banks in India include: Nidhi Bank Muthoot Nidhi Bank Bajaj Finserv Nidhi Bank Fullerton India Nidhi Bank Some examples of well-known Cooperative Societies in India include: Amul Cooperative Dairy Society IFFCO (Indian Farmers Fertiliser Cooperative Limited) KRIBHCO (Krishak Bharati Cooperative Limited) NAFED (National Agricultural Cooperative Marketing Federation of India Limited) Indian Farmers Cooperative Limited (IFFCO)
Is Nidhi a public or private company?
Nidhi Companies are neither public nor private companies in the traditional sense. They are a distinct category of non-banking financial institutions regulated by the Ministry of Corporate Affairs in India. Nidhi Companies operate as mutual benefit societies, primarily serving their members' financial needs, and are governed by the Nidhi Rules, 2014.
Does a cooperative society come under RBI?
Cooperative societies are not directly regulated by the Reserve Bank of India (RBI). Instead, they are overseen by the respective state Cooperative Departments or Registrars of Cooperative Societies. However, certain cooperative banks and credit societies may come under the purview of the RBI, especially if they are licensed to operate as banking institutions or are engaged in activities subject to RBI regulations.
