Nidhi Company is a kind of Non-Banking Financial Company (NBFC). In literal words it means ‘finance’, ‘fund’ and ‘treasure’. The purpose behind the formation of Nidhi Company is to receive and lend money amongst its members. It develops the habit of saving and reserving funds amongst members and works on the standard of mutual benefit. Nidhi Companies are exempted from the major provisions which are otherwise applied on NBFC in India and there is no separate registration required for Nidhi Company under RBI. However, the Nidhi Rules, 2014 have brought few significant points to be noted by Nidhi Companies before accepting any deposit from its members. Hence, in this article we shall discuss on the Acceptance of Deposits by Nidhi Company.
What do you Mean by Acceptance of Deposits by Nidhi Company?
According to the Companies Act, 2013[1] :- “Deposit” shall include any money receipt by way of loan or by way of deposit or in any other way by a company but shall not cover such category of the amount as may well be approved in consultation with the Reserve Bank of India.
As, public deposit is one of the finest ways to raise any fund in Nidhi Company. Nonetheless, as per law it is equally mandatory to timely repay the depositors. Acceptance of deposit is the only reason of creation of Nidhi Company. Hence, rule 11 and 13 automatically is an important rule of Nidhi Rules,2014.
What are the General Prohibitions or Limitations for Acceptance of Deposits?
- Acceptance of deposit only from its members.
- Nidhi Company shall not take deposits from any corporate body.
- No acceptance of deposit from any minor. Moreover, only if the deposits are made through the legal or natural guardian on behalf of the minor then such deposits shall be accepted in minor’s name.
- Nidhi Company shall not enter into any arrangement of partnership for the purpose like activities of borrowing or lending.
- Nidhi Company shall prohibit the issuance of any advertisement which can be a form for soliciting deposits.
- It shall not pay any incentive or broker charges or mobilise deposits from its own members.
- It shall assign to every deposit holder ten equity shares minimum or shares that must be equivalent to one hundred rupees.
- It shall attain documentary evidence as an identity and address proof from its members as mentioned in the rules.
- Nidhi Company shall not open branches or deposit centres or collection centres by any name outside the state where it has its registered office located or shall not open branches unless annual return and financial statement is filed with the Registrar.
- The ratio of the Nidhi Company to deposits for the Net Owned Funds should not be beyond 1:20.
Read our article:Know the Checklist of Documents Required for Nidhi Company Registration
What Types of Deposits Allowed in Nidhi Company?
There are three types of deposits that are allowed by the Nidhi Company as has been given below:
Limits on Loan
If any person wants to take a loan from a Nidhi company, then he should know the ceiling limit for the same. Here is the depiction of the same:
| Amount of Deposit (in Rs.) | Loan Limit |
| 2 Crore | Rs. 2 Lakhs |
| 2 Crore to 20 Crore | Rs. 7.50 Lakhs |
| 20 Crore to 50 Crore | Rs.12 Lakhs |
| 50 Crore or more | Rs.15 Lakhs |
Interest on Loan
If an individual has taken a loan from Nidhi Company then the interest rate that they are required to pay is not beyond Rs. 7.50 %. This interest rate is calculated on the method of reducing balance.
Application Form for Acceptance of deposits
1. Every application form for acceptance of deposit shall include:-
- Nidhi Company’s basic details like the company’s name, incorporation date, etc.
- Management particulars.
- Dividend and Net Profit for previous 3 years.
- Maturity period together with the interest rate.
- Other necessary terms and conditions as may be approved.
2. Additional Conditions that ought to be provided in the form are:-
- Provision for depositor to approach Tribunal in case of non-payment of deposit or part thereof by the Company.
- Any other deficit on Company’s behalf shall permit the depositor to visit the National or State or District Consumer Redressal Forum for the relief.
- The Directors declaration as to each and every assertion mentioned in the form is truthful and correct.
- The Reserve Bank of India or Central Government does not insure the deposits neither guarantee the repayment.
- The depositor’s verification clause stating to understand and agree to all the terms and conditions as given in the Form.
3. Every Nidhi Company shall take appropriate introduction of the new depositors before they open their accounts or accept their deposits and shall also keep all the records in the evidence on which they have shown reliance for such introduction.
What are the Conditions for Foreclosure of Deposits?
The conditions on which any Fixed or Recurring Deposit be foreclosed by Depositors are:-
- That within 3 months of Acceptance of deposits the Nidhi Company shall not repay.
- In case any amount is paid after 3 months but prior to 6 months at the depositor’s request then in such case there shall be no payment of interest up to 6 months from the deposit date.
- In case any amount is paid past 6 months but prior to the expiry period, 2% interest rate shall be reduced from the rate at which it was earlier accepted.
- In case of the depositor’s death, the deposit shall be paid back to the legal heir or the surviving depositor or the nominee’s with the interest rate up to the repayment date without reducing the interest rate.
Brief on Unencumbered Deposits
It is mandatory for every Nidhi Company to invest in the post office or the scheduled bank account of not less than 10% of the deposits that remains outstanding at the closing of business on the second preceding month last working day.
However, it is important to point out that in case of unanticipated commitment, this particular amount can be temporarily withdrawn on the prescribed terms and conditions by the Regional Director approval only.
Conclusion
Acceptance of deposits is the primary reason for starting a Nidhi Company. Therefore, it is important that the depositors should oblige with the due procedure otherwise it will put the company in legal trouble.
Read our article:Why you should Start a Nidhi Company in India?
