Nidhi company is a guiding force for small investors in India. Nidhi company is an NBFC (Non-Banking Financial Company) regulated by the RBI. It has a legal framework for small investors, potential businessmen and other financial experts.
Introduction:-
It is a government-regulated program that is dedicated to performing for the welfare of small and medium enterprises. The Ministry of Corporate Affairs regulates the fundamental aspects of a Nidhi company.
The structure of Nidhi company in India is formed under Section 406 of the Companies Act, 2013. The full form of NIDHI is National Initiative for Developing and Harnessing Innovations.
Composition And Functions Of Nidhi Company
A Nidhi company should have at least seven members in its core committee or group. Three of the seven members should perform the role of directors of the company. The company should also ensure that it can maximize its strength to 200 in one year from the registration date. These are all minimal requirements which establish the basic structure of Nidhi company in India.
A Nidhi company has a number of tasks to perform. Its main objective is to enable people to save and invest more in a safe and enclosed system. The MCA and RBI collectively regulate the workings of the Nidhi company in India. The following are the most important functions of Nidhi company:
- Encourage its members to increase their savings.
- Establish simple steps to invest in profitable sources of income for its members.
- Enable easy lending and borrowing among its core members.
- Make sure that there is a smooth flow for effective investments at lower credit rates.
- Utilize the deposits to invest in government securities and bonds.
As it is clearly visible, the contribution made by the members of Nidhi company forms the basis of its financing abilities. It is an enclosed system that encourages the mutual benefit of the members and increases their interest in savings. There are certain rules and regulations for all members to follow.
Loan Structures And Restrictions
A member can avail of loans and advances from Nidhi company once he has started investing money. Some rules and guidelines set by the MCA control the number of loans given by the Nidhi company. They are as follows:
- You can take a loan upto Rs. 2 lakhs if you have deposited an amount within Rs. 2crores.
- The loan amount can increase upto Rs. 7.50 lakhs if your deposited amount is between Rs. 2 crores and Rs. 20 crores.
- If your deposit is more than Rs. 20 crores but less than Rs. 50 crores, you can take a loan upto Rs. 12 lakhs.
- You can get a loan of Rs. 15 lakhs if your deposit is more than Rs. 50 crores.
The tenure of the loan will be six months minimum, and overall it can be 60 months. You will be able to check the status of your loan and its authenticity. However, you also need to maintain regular deposits in order to get loans as and when necessary. The structure of Nidhi company in India has a fixed lending and borrowing system. You cannot undertake huge investments at once. It is considered to be a safe concept to avoid fraud and mismanagement.
Advantages Of Investing And Borrowing From Nidhi Company
Associating yourself with a Nidhi company can be beneficial in more than one way. Firstly, the process of registration is quite simple, and it is also conducted online nowadays. Moreover, you will also be able to avail of numerous benefits that include the following:
- Flexible system: You will be able to manage your financial aspects in a much easier way. This is because there is no third party involved, and the members can mutually help each other. Though there are Government and RBI guidelines that you need to follow, there are no strict rules to follow.
- Low credit rate: You can also take loans at low credit rates. This means that there will not be any grave financial situation whatsoever. You can also invest your money safely in profitable income sources.
- Easy to manage: The various financial processes in a Nidhi company are very easy to follow. You just need to go through the guidelines and lend or borrow accordingly. There is no hard and fast rule as well. Moreover, the Government is also becoming lenient regarding the minimum equity share amounts or credit rates and more.
- Encouragement on savings: Once you become a member of a Nidhi company, you will be determined to save your income for fruitful investments. The main objective of this company is to motivate its members to increase their savings. Only then will you be able to invest and lend money to other members of the company.
Restrictions On Nidhi Company And Its Drawbacks
Registering a Nidhi company may seem a simple task, but it is not open to vast financial sources of income. The structure of Nidhi company in India is limited to a small group of members with minimal investments at a time. A Nidhi company is restricted from performing the following activities:
- It cannot take part in businesses related to chit funds, lease financing, hire purchase or insurance rates.
- You cannot open a current account as a member of Nidhi company.
- The members can lend and borrow money among themselves. They are not allowed to be involved in any brokerage or agreements with Nidhi company’s credit.
- No advertisements of Nidhi company are allowed to feature anywhere.
- A non-member cannot lend or borrow money from Nidhi company.
- You cannot use the company’s finances as security deposits in other financial exchanges.
Thus, you can see that Nidhi company is limited to the loans and advancements made by its members. It has no scope of expansion in the outside financial world as such. However, there will always be a massive area for intimate financial relations in Nidhi company. You will get good practice in establishing financial aspects. It will also enable you to securely invest in profitable sources as and when needed.
Create Your Financial Base With A Nidhi Company Startup
There are various concerns among people that Nidhi company cannot function globally. However, the truth is that a Nidhi company will prepare you to emerge as a professional expert handling crucial financial aspects. It will encourage you to do better as a startup of a small firm or business holding. Analyze the basic structure of Nidhi company in India with Vakilsearch.
However, they do not affect the lenient system in which Nidhi company effectively works.
We will help you complete your eNidhi registration, provide 1 DSC and 3 DINs for better functioning and establish your startup. Gradually, you will be able to handle your financial dealings in a much better and organized manner.
Read More:-
