{"id":6764,"date":"2020-04-15T12:23:25","date_gmt":"2020-04-15T06:53:25","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=6764"},"modified":"2024-12-10T17:54:16","modified_gmt":"2024-12-10T12:24:16","slug":"how-nidhi-companies-are-different-from-nbfcs","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/how-nidhi-companies-are-different-from-nbfcs\/","title":{"rendered":"How Nidhi Companies are Different from NBFCs? \u2013 Nidhi Companies Vs NBFCs"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Nidhi Company is a company that aims to start a company with less capital whereas NBFC company requires huge capital investment. In India, NBFC Companies and Nidhi Companies are working at an expansive and restricted scale respectively. There are undeniable advantages that one can enjoy by opting for Nidhi Company. However, there are certain restrictions where Nidhi company cannot perform such activities that NBFC can perform which makes Nidhi Companies different from NBFCs. NBFC\u2019s extended roles and benefits to the customer are a plus point which is prevailing over Nidhi Companies.<\/p>\n\n\n\n<p>In this\ntopic, we will discuss how Nidhi companies are different from NBFCs in terms of\nthe things that an NBFC can perform but the Nidhi companies are restricted to\ndo.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/how-nidhi-companies-are-different-from-nbfcs\/#What_is_Nidhi_Company\" >What is Nidhi Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/how-nidhi-companies-are-different-from-nbfcs\/#What_is_an_NBFC_Company\" >What is an NBFC Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/how-nidhi-companies-are-different-from-nbfcs\/#Difference_between_Nidhi_Company_NBFC_%E2%80%93_Nidhi_Companies_Vs_NBFCs\" >Difference between Nidhi Company &amp; NBFC &#8211; Nidhi Companies Vs NBFCs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/how-nidhi-companies-are-different-from-nbfcs\/#Takeaway\" >Takeaway<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Nidhi_Company\"><\/span>What is Nidhi Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Nidhi\nCompany is a company governed under <strong>section 406 of the Companies Act 2013<\/strong>.\nNidhi company is a company incorporated with the object of encouraging the\nhabit of thrift and saving among its members, receiving deposits and lending\nthe same to its members only. A Company incorporated under section 406 of the\nCompanies Act,2013 shall have the last words\u2019 Nidhi Limited\u2019 as a part of its\nname.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Requisites for Nidhi Company<\/h3>\n\n\n\n<ul>\n<li>Minimum capital requirement Rs 5 lakh.<\/li>\n\n\n\n<li>A Minimum number of 3 directors and 7 members.<\/li>\n\n\n\n<li>Minor cannot be a member of Nidhi Company.<\/li>\n\n\n\n<li>The Number of members should increase to at least 200 members within 1 year of its incorporation.<\/li>\n\n\n\n<li>The deposit shall not be less than 10% of the outstanding deposits.<\/li>\n\n\n\n<li>A Net owned fund should be Rs 10 lakh.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_an_NBFC_Company\"><\/span>What is an NBFC Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>NBFC Company is the company incorporated under the Companies act 2013 intending to provide a long term and specialized credit facilities to the customers. NBFC works similarly as the bank in meeting the financial needs of the corporate as well as the weaker section of the society. NBFC cannot commence the business without obtaining a <a href=\"https:\/\/corpbiz.io\/nbfc-registration\"><strong>NBFC registration<\/strong><\/a> from the <strong><a href=\"https:\/\/corpbiz.io\/rbi\">RBI<\/a><\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Requisites for NBFC<\/h3>\n\n\n\n<ul>\n<li>NBFC shall be incorporated under the <a href=\"https:\/\/corpbiz.io\/learning\/types-of-companies-under-companies-act-2013\/\">Companies Act,2013<\/a> or any other previous Act.<\/li>\n\n\n\n<li>Minimum net owned fund Rs 2 crore.<\/li>\n\n\n\n<li>The business activity of NBFC should be defined under <strong><em>Section 45I(a) of the RBI Act,1934<\/em><\/strong><sup><a href=\"https:\/\/www.rbi.org.in\/Scripts\/BS_NBFCNotificationView.aspx?Id=557\"><strong><em>[1]<\/em><\/strong><\/a><\/sup>.<\/li>\n<\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/incorporation-procedure-nidhi-company-india\/\">What is Nidhi Company? Know it\u2019s Incorporation Procedure\n<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Difference_between_Nidhi_Company_NBFC_%E2%80%93_Nidhi_Companies_Vs_NBFCs\"><\/span>Difference between Nidhi Company &amp; NBFC &#8211; Nidhi Companies Vs NBFCs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Nidhi\ncompanies are the companies incorporated to encourage the savings of the people\nand to create a fund for its members. Where NBFCs are incorporated torender\nfinancial assistance to the business and the weaker section of the society.\nNBFCs are playing a vital role in the country\u2019s economy.<\/p>\n\n\n\n<p>Nidhi companies have few restrictions and limitations. Meanwhile, NBFCs are providing loans, acquiring stocks except the activities related to the Agriculture or industrial sector. Though Nidhi Companies are regulated by the MCA and RBI, still there are certain things that an NBFC can do but a Nidhi Company cannot.<\/p>\n\n\n\n<p><strong><em>Below-mentioned\nare the reasons why Nidhi Company is different from NBFCs-<\/em><\/strong><\/p>\n\n\n\n<ul>\n<li><strong>Nidhi Company cannot conduct any other business &#8211; <\/strong>A Nidhi Company cannot undertake any other activity or transactions other than as mentioned in the Nidhi Scheme. Nidhi company is different from NBFCs as they don\u2019t have a right to acquire securities in the form of stock or share that has been issued by the company.<\/li>\n<\/ul>\n\n\n\n<p>Further,\nNidhi Company cannot conduct a chit fund and hire leasing business.<\/p>\n\n\n\n<ul>\n<li><strong>NBFC requires prior approval of RBI before commencing the\nbusiness &#8211; <\/strong>Nidhi Company does not require RBI approval before commencing\nits lending business. <\/li>\n<\/ul>\n\n\n\n<p>However, NBFC\nrequires prior approval of RBI before commencing the business.<\/p>\n\n\n\n<ul>\n<li><strong>Restriction on issue of Preference Share\nCapital &#8211; <\/strong>A Nidhi Company shall not issue Preference Share Capital for\nraising funds. Nidhi Companies accept money in the form of deposits, not with\nany other mode.<\/li>\n<\/ul>\n\n\n\n<p>However,\nNBFC can issue Preference Share Capital or Debenture both.<\/p>\n\n\n\n<ul>\n<li><strong>Opening of Current Account &#8211; <\/strong>Nidhi\nCompanies are not allowed by the government to open a current account. Nidhi\nCompany is treated as a mutual benefit organization and it is not treated as a commercial\ncompany.<\/li>\n<\/ul>\n\n\n\n<p>NBFCs must\nopen a Current Account.<\/p>\n\n\n\n<ul>\n<li><strong>Restriction on opening a branch before a\ncertain period &#8211; <\/strong>In India, Nidhi company cannot open a branch it earns profits\ncontinuously for 3 years. It is one of the mandatory conditions and cannot be\nchanged even if you have asked permission from the Registrar of Companies\n(ROC). <strong><\/strong><\/li>\n<\/ul>\n\n\n\n<p>While, there is no\nsuch requirement in the case of NBFC.<\/p>\n\n\n\n<ul>\n<li><strong>Nidhi Companies cannot pay any brokerage &#8211; <\/strong>For the mobilization\nof deposits from the member, Nidhi Companies cannot pay any brokerage or\nincentive<\/li>\n<\/ul>\n\n\n\n<ul>\n<li><strong>Investment and technical Parameters &#8211; <\/strong>NBFCs have to meet all the investment and technical parameters. The process involves in the NBFC is very long as compared to <a href=\"https:\/\/corpbiz.io\/nidhi-company-registration\"><strong>Nidhi Company registration<\/strong><\/a> as there is less compliance requirement as compared to NBFC.<\/li>\n<\/ul>\n\n\n\n<ul>\n<li><strong>Nidhi Company is Limited within the State &#8211; <\/strong>The working of the\nNidhi company is limited within the state i.e. the Nidhi company is a brand\nwithin a state. However, it is not in the case of NBFC.<\/li>\n<\/ul>\n\n\n\n<ul>\n<li><strong>Restriction to enter into a Partnership <\/strong>&#8211; A Nidhi Company cannot enter into a Partnership for borrowing or <a href=\"https:\/\/corpbiz.io\/peer-to-peer-lending-license\">lending <\/a>purposes.However, there is no such restriction in the case of NBFC.<\/li>\n<\/ul>\n\n\n\n<ul>\n<li><strong>Nidhi Company cannot add a Body corporate as its member &#8211; <\/strong>In case of Nidhi Company there is a restriction on Membership. A Nidhi Company cannot include Body corporate as its member. Hence, it cannot accept deposits from such institutions.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Takeaway\"><\/span>Takeaway<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Nidhi Company is a rising concept in India. However, Nidhi Companies have certain restrictions and the above-mentioned restrictions would affect the growth of the business. Further, if we talk about NBFCs, NBFCs extended financial services are boosting the presence in the lending department. NBFCS are playing a vital role in the economic development of the country.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/restrictions-on-operating-nidhi-company\/\">Operating Nidhi Company; Know about the Restrictions on Nidhi Company<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Nidhi Company is a company that aims to start a company with less capital whereas NBFC company requires huge capital investment. In India, NBFC Companies and Nidhi Companies are working at an expansive and restricted scale respectively. There are undeniable advantages that one can enjoy by opting for Nidhi Company. However, there are certain restrictions [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":6770,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[91,31],"tags":[488],"acf":{"service_id":"9"},"authorName":"Priyanka Bajpayee","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/03\/IMG-20220303-WA0005.jpg","authorDescription":"A Company Secretary together with PG in international Business, she has gained significant experience as legal content writer. She has keen interest in doing research and writing on legal and financial subject matters. She also holds work experience in legal compliances.","postViews":17633,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/6764"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=6764"}],"version-history":[{"count":16,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/6764\/revisions"}],"predecessor-version":[{"id":67705,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/6764\/revisions\/67705"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/6770"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=6764"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=6764"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=6764"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}