This page provides information on the guidelines issued by the RBI for Nidhi Finance India and other Non-Banking Financial Companies.
Nidhi Finance India are Non-Banking Financial Companies (NBFCs) which are registered under the Companies Act, 2013 and regulated by the Reserve Bank of India (RBI).
A Nidhi Company is formed with the primary objective of cultivating the habit of thrift and savings amongst its members. It also provides loans to its members against the security of fixed deposits.
These companies are registered with the Ministry of Corporate Affairs (MCA) and are required to comply with the guidelines of the RBI. In this blog, we will explore the RBI guidelines for Nidhi Companies. Ready to make your business official? Get started with VakilSearch and take care of all your compounding needs today!
What is Nidhi Finance India all about?
The primary business of Nidhi Finance India is to accept deposits of money from the members and lend to other members. Nidhi companies are also called Permanent Funds, Benefit Funds, Mutual Benefit Funds, and Mutual Benefit Companies. They are regulated under Section 406 of the Companies Act, 2013. According to the regulations, Nidhi companies must have at least 200 members and a minimum capital of ₹5 lakhs.
Nidhi Finance India are required to maintain a minimum liquidity ratio of 20% and a minimum net-owned fund of ₹10 lakhs at all times. They can offer various products such as fixed deposits, recurring deposits and loans.
They are prohibited from engaging in any kind of investment activities. Any investment made by the company must be in the form of loans and deposits. They are also not allowed to lend to any entity outside the purview of the Companies Act.
Nidhi companies are required to file a return of deposits every year with the Registrar of Companies. They also need to file annual returns with the Ministry of Corporate Affairs.
Eligibility Criteria for Nidhi Finance India
- All the promoters must be Indian citizens and at least three directors are required to establish the company. The minimum paid-up capital is ₹5 lakhs while the maximum is ₹2 crores. The registered office must be situated within the jurisdiction of the Registrar of Companies (ROC)
- The company must have a minimum of 200 members, of which at least ten must be shareholders. It must also have a minimum net owned fund of ₹5 lakhs and the company should not be engaged in any other activities except those related to Nidhi’s business
- The company must offer a minimum of 5% return on their members’ deposits, while the maximum return should not exceed 12%. It must also have a minimum liquid asset of 15% of its liabilities and must provide a loan up to a maximum of 20 times the net owned fund
- Any Nidhi Company Must Comply with the Rules and Regulations prescribed by the Reserve Bank of India (RBI). They must submit their audited financial statement every year to the ROC, along with the annual return
- The company must also maintain separate accounts for its members, and should not accept deposits from any other source than its members. The company must also have a good track record of repayment of deposits and should not have any overdue deposits
- Finally, the company must have a good credit rating, as well as a net worth that is at least five times the net owned fund. To know further connect with VakilSearch. Our experts are ready to assist you in all possible ways.
Nidhi Company RBI Guidelines
The following are the RBI guidelines for Nidhi Finance India :
Capital Requirement:
-The minimum paid-up capital should be ₹5 lakhs
Net-Owned Fund:
- The net owned fund should be maintained at a minimum level of ₹ 20 lakhs
- The net owned fund should not be used for any other purpose except the business of the Nidhi Company
- The net owned fund should be maintained in the form of cash, deposits with the Reserve Bank of India, approved securities and other assets
Prudential Norms:
- The Company should maintain a loan-to-value ratio of not more than 70%
- It should maintain a net non-performing asset of not more than 2%
- The Company should provide for a loan loss provision of at least 0.50% of the gross advances
- The Nidhi Company should have a minimum liquidity ratio of 10%
Audit Requirements:
- The Nidhi Company Registration should get its accounts audited by a qualified auditor
- The audited accounts should be submitted to the RBI within three months of the end of the financial year
- The Nidhi Company should also get its internal audit done by a qualified internal auditor
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Reserve Fund:
- The Nidhi Company should maintain a reserve fund of at least 10% of its net profit for the last three years
- The Nidhi Company should invest the reserve fund in approved securities
- The reserve fund should be used only for the purpose of meeting the losses, if any, of the Nidhi Company
Disclosure Requirements:
- The Nidhi Company should disclose the financial statements and other information in the prescribed form on its website and to the RBI
- It should also disclose the details of its directors and key managerial personnel
- It should disclose the details of its investments, borrowings and deposits in the prescribed form
Conclusion
The Nidhi Companies are regulated by the Reserve Bank of India and are required to comply with the guidelines issued by the RBI. The RBI has prescribed the eligibility criteria, capital requirement, net-owned fund, prudential norms, audit requirements, reserve fund and disclosure requirements for Nidhi Companies. They should comply with all the guidelines to operate in a safe and sound manner.
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