Starting a Nidhi Company is more like a gamble because you aren’t sure whether it will work out and bring you the success or it will take a dip. If it works out then your investment was worth and a wise decision and if not, then it entirely went into vain. Whether or not your business will work out depends on the strategies that you implement to run the business. Therefore, it is quite imperative to incorporate good marketing insights and powerful business strategies to run the business successfully. One such wise approach would be to get Nidhi Registration done, in the case; you’re planning to start your own business in the finance sector.
In this blog, we will come across various aspects of Nidhi Company and Its Registration. Let’s start-
What is Nidhi Company?
A Nidhi Company is a non-banking Indian finance company which is recognized under sector 406 of the Companies Act, 2013. The company’s core pursuit is to borrow and lend money to its members. Nidhi Registration is quite an easy procedure and doesn’t require the approval of Reserve Bank of India, unlike RBI regulated NBFC. Nidhi Company Registration is done as per the provision of Companies Act, 2013 and as a public limited company.
Types of funds in Nidhi Company
As stated above, under Nidhi Company Registration, the member can lend and borrow funds to and from its client. Such funds come in several shapes described below:
- Permanent funds
- Mutual benefit funds
- Mutual benefit company funds
These funds are completely true and legit as they are recognized by the government. Apart from these 3 funds, there are various other types of funds that Nidhi provides to its clients. You can know about them, once you get your Nidhi Registration has been established.
Note: Any kind of fund borrowed or lent by your Nidhi Company should be according to the Company Rules, 2014, especially Chapter XXIV.
Provisions of Nidhi Company
Before you approach for Nidhi Registration, you must ensure the following:
- Your company must have at least 7 shareholders and 3 directors
- The minimum capital required is Rs. 5 lakh, which is to be increased to Rs. 10 lakh in the span of one year.
Basic facts to know before Nidhi Company
- Nidhi Company is regulated by the Ministry of Corporate Affairs and the registration is done as a public limited company.
- It is governed by Nidhi Rules, 2014 and recognized under sector 406 of the Companies Act, 2013.
- No approval from RBI is required for the formation or registration of the company. However, RBI can guide and issue directions in the matter relating to deposit acceptance activities.
- The chief activities of such companies are to borrow and lend money to its shareholders and members.
- Every firm registered as Nidhi needs to add Nidhi Limited at the end of the company’s name.
- Within a year of Nidhi Registration, it’s mandatory to have a minimum of 200 members on-board.
- About 80% of Nidhi Registration in India is done in Tamil Nadu.
Reasons You Should Go For Nidhi Company
So if you have started a finance business and are a bit confused if Nidhi Company Registration would be a wise option or not, then you can look below, read and clear your doubts. Below, I have enlisted a few reasons why you must choose Nidhi Registration for your business:
Loans at minimum interest
As compared to banks, the borrowing process of a Nidhi Company is very cheaper and it’s one of the biggest advantages that it offers. Nidhi Registration saves people from getting indebted.
Promotes and encourages savings
As we know, A Nidhi Company works on mutual benefit, where people and lend and borrow money. The basic concept of that it follows is to promote and encourage its members for saving money, along with it also promote the concept of spending funds thoughtfully.
Offers a legal identity
Since the Nidhi Company Registration is done under the provisions of Companies Act, 2013, it offers a separate legal identity to businesses.
Management is easy
In Nidhi, it’s easy to make any required changes, which wasn’t really simple in NBFC’s that are managed by RBI. One just requires filing simple forms with MCA.
Since the Ministry of Corporate Affairs is the one who is accountable for Nidhi Registration and monitory, they are considered more credible as compared to those run and regulated by the State Government. Nidhi Companies are considered as the best choice for people opting to start a business in the finance sectors.