Nidhi Company

Guide on Benefits of Nidhi Company Registration in India

calendar20 Jun, 2020
timeReading Time: 5 Minutes
Benefits of Nidhi Company Registration

As there are several benefits of Nidhi company registration in India, Nidhi companies have become the first choice for small financers. Furthermore, people all across the Indian boundaries consider it the safest option for the commencement of a finance business in India. Nidhi Company Registration in India would serve the principal goal of a Nidhi company, i.e., encouraging the saving habits amongst the members.

What is a Nidhi Company?

The term ‘Nidhi’ refers to finance, fund, or treasure. A Nidhi company is a form of company in the sector of Indian non-banking finance that gets incorporated with the mission to develop the habit of thrift as well as savings amongst its members. Activities of Nidhi Company comprise borrowing and lending money among their members for their mutual benefit. Registration of Nidhi Company takes place in accordance with the provisions stated in Section 406 of the Companies Act of 2013.

Reserve Bank of India has got the authority with respect to Nidhi Companies to issue directives to them. However, there is no provision for separate registrations under the Reserve Bank of India. Moreover, they can perform their operations without any mandatory condition of getting any license from RBI. Nidhi Company blesses the loan or finance business in India with ease and affordability assistance.

Companies that are involved in doing Nidhi business have got various names such as Nidhi, Mutual Benefit Funds, Benefits Fund, Permanent Fund, and Mutual Benefit Companies. All the funds that get immersed into the Nidhi Company are acquired from the members-only and utilized by its members as well. In order to conduct the activities, compliance with the Nidhi Rules, 2014, and the Companies Act, 2013, is crucial. In the next section of the write-up, we will let you understand the benefits of Nidhi Company Registration in India.

Fundamentals Benefits of Nidhi Company Registration in India

The various benefits of Nidhi Company Registration in India are-

Simple Formation Procedure

  • The process of Nidhi Company formation is free from all the complexities. In other words, it’s simple and easy to form a Nidhi Company.
  • There is no need for a Nidhi Company to attain a license from the Reserve Bank of India.
  • The formation of this company requires a minimum documentation process.
  • In the establishment of Nidhi Company, there is a requirement of only seven members. Three members out of the seven members will be the director.
  • Ministry of Corporate Affairs, i.e., MCA is the responsible body behind the administration of Nidhi Company. Along with this, RBI can issue commands, if required.
  • It takes around 10-15 days for a Nidhi Company to get registered.

Limited RBI Regulations

  • The regulations commanded by the Reserve Bank of India on the Nidhi Companies are limited. By its nature of the activity, Nidhi Company falls under the NBFC category, and also it is a finance company.
  • These companies should incorporate themselves with the Ministry of Corporate Affairs (MCA[1]) as public limited companies.
  • Getting approval from the RBI side is not a necessary condition. Nidhi Companies follow the Nidhi Rules, 2014 allotted by the center for the smooth functioning and running of the company.
  • These companies got exemptions from foremost provisions otherwise applicable in the case of Non-banking Financial Companies in India.
  • Reserve Bank of India won’t be creating any hindrances in the process of Nidhi Company Registration in India. Thus, you can utilize such types of benefits of Nidhi Company Registration in India.

No Scope for Outsiders

  • The formation, as well as management of Nidhi Companies and the benefits that it provides, are concerned with and to their members only.
  • Outsiders or external parties didn’t get the permission to interfere in any matters of Nidhi Companies by any means.
  • Neither they have any right to interfere in the working of the Nidhi Companies, nor can the external parties receive credit from these companies.
  • Besides this, the outsiders or external parties can’t deposit money, and also they can’t interfere in the management-related decisions.     

Low Capital Requirement

The minimum requirement of capital is one of the vital benefits of Nidhi Company registration in India. According to the Nidhi Rules of 2014, net owned fund of Nidhi Company needs to be Rs 10 lakhs. MCA (Expanded as Ministry of Corporate Affairs) in their directives stated that the minimum capital requirement for Nidhi Company registration in India is Rs 5 lakhs. In addition to this, the capital needs to get elevated to the amount of at least Rs 10 lakhs in the time limit of 1 year. In comparison to numerous finance companies, the capital needed for registering a Nidhi Company in India is less. For Nidhi Company registration at the keenly-priced amount, you can reach https://corpbiz.io/.

Read our article: Nidhi Company Registration: Amendment Rules 2020

Additional Benefits of Nidhi Company Registration in India

Micro Banking Assistance 

Nidhi Companies provide assistance to the remote and rural people of India by rendering micro banking services. Those areas situated in far-off locations receive micro banking services via Nidhis.

Stimulate Saving Habits

One of the notable benefits of Nidhi Company in India is that it stimulates the saving habits amongst its members. From a six-year-old child to a 60-Yr old man, everyone is craving to do savings. There is a certainty in Nidhi Company, and thus, members won’t be putting restrictions on their saving habits.

Meeting the Demands of Lower and Middle Class

Nidhi Companies leads from the front when it comes to meeting the demands of those people who belong to the lower as well as the middle class of society by lending them financial aid without any further involvement of documentation. Thus, it is one of the significant benefits of Nidhi Company registration in India.

benefits of Nidhi Company registration in India

Mandatory Documents to Complete the Formalities of Nidhi Company Registration in India

The following documents are mandatory for the completion of formalities related to Nidhi Company registration in India-

  • Registered Office Proof– Copies of the rental agreement or sale deed, utility bill, property tax receipt, and No-objection certificate from the hands of the landlord (Rented Property). The utility bill must not be older than two months.
  • ID Proof of Shareholders and Directors– More than one copy of PAN Card for Indian Nationals as well as Passport in attested form for foreign nationals
  • Directors and Shareholders Residential Proof– Multiple copies of Driving License/Passport/Ration Card/Aadhaar Card/Utility Bill/Voter ID
  • Passport-sized photos of the Directors
  • Documents of Incorporation- Digital signature application signed document & Soft copies of incorporated documents in a signed form.

Bottom Line

In the financial market, Nidhi Company is trending in recent times. After going through the benefits of Nidhi Company registration in India, people have started gearing up for Nidhi Company registration. At an affordable rate, it’s the safest pathway for initiating a finance business in India.  As compared to Credit Co-operative Societies, Nidhi Company is a better choice. At Corpbiz, we provide user-friendly Nidhi software that is created for running Nidhi Companies in India.

Read our article:Compliances for a Nidhi Company: A Complete Checklist

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