DR AMBEDKAR INSTITUTE OF TECHNOLOGY

DEPARTMENT OF MBA

NAME : ANOOP A
USN : 1TU21BA03
SUBJECT : FINANCIAL MANAGEMENT
SUBJECT CODE : 20MBA15
TOPIC : FUNCTIONING OF NIDHI’S COMPANY
ASSIGNED BY : Mrs. R vidya
 WHAT IS NIDHI COMPANY
• Nidhi Company is governed by Section 406 of the Companies Act, 2013 and Company Nidhi Rules, 2014. The
company is incorporated as a public company.
• As per Section 406, “Nidhi” means a company which has been incorporated as a Nidhi with the object of
cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its
members only, for their mutual benefit.

INCORPORATION OF NIDHI COMPANY

The company is incorporated as a public company with following requirements:

• Minimum paid up capital of Rs. 5,00,000, 3 directors and 7 members

• No preference shares shall be issued.
• Every Company incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.

• A Nidhi company can be incorporated via Spice (members equal to 7) or through INC-7.
SPICe Route INC-7

• Take name approval in INC-1. >Take name approval in INC-1.

• File eform INC-32 (SPICe) with eMOA and >File eform INC-7(incorporation) along DIR-12(director app.) and
with eAOA. (Name can be applied in INC-32 also). INC-22 (address)
• Submit Application for PAN and TAN. >Get Certificate of Incorporation.

MEMBERSHIP
• A Nidhi shall not admit a body corporate or trust as a member.
• A minor shall not be admitted as a member of Nidhi: (Provided that deposits may be accepted in the name of a
minor, if they are made by the natural or legal guardian who is a member of Nidhi.)

OBJECT OF NIDHI COMPANY

To receive, accept or collect Savings or Deposit money from its members of all categories as deposit i.e. Saving
Deposit account , Fixed Deposit (F.D), Recurring Deposit (R.D), Monthly Income Scheme ( MIS),Term Deposit (T.D),
Saving account, under various savings schemes will be formulation from time to time by the company will provide
as such Interest or benefit on the Deposit whatever is fit for and beneficial to the company and to the members
as per the rules & regulation or guideline of Reserve Bank of India(RBI), Ministry of Corporate Affairs and
Regulatory Authority on NBFC or NIDHI.

To lend, grant loans to the members or shareholders only as against securities of immovable properties and or on
the security of deposits, movables such as gold, silver, jewellery, Kisan Vikas Patra, National saving Certificates,
Life Insurance Policy and to provide all kinds of micro finance services on behalf of personal credit and member
as a guarantor, as may from time to time prescribed in law for Mutual Benefit / Nidhi Companies.
 POST INCORPORATION REQUIREMENTS

Every Nidhi shall, within a period of one year from the commencement of these rules, ensure that it has:

• Minimum number of members should be 200 and ensure the membership is not reduced below 200 at any time.
• Net owned funds shall be Rs.10,00,000/- or more
• Ratio of net owned funds to deposit shall be not more than 1:20.
• Unencumbered term deposits of not less than 10% of the outstanding deposits as per Rule 14.
• A Nidhi Company shall not admit a body corporate or trust as a member. A minor shall not be admitted as a
member of Nidhi Company.

GENERAL RESTRICTIONS ON NIDHI COMPANY

No Nidhi shall carry on:
• the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities by anybody
corporate.
• Issue preference shares, debentures, or any debt instrument by any name or in any form whatsoever.
• Open any current account with member.
• Acquire another company by purchase of securities or Control the composition of the Board of Directors of any
other company in any manner whatsoever.
• Carry on any business other than the business of borrowing or lending in its own name;
• Accept Deposits from or lend to any person, other than its members;
• Pledge any of the assets lodged by its members as security;
• Take Deposits from or lend money to anybody corporate;
• Enter into any Partnership Arrangement in its borrowing or lending activities;
• Issue or cause to be issued any advertisement in any form for soliciting deposit;
• Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or the granting
loans
• Enter into any arrangement for the change of its management, unless it has passed a special resolution in its
general meeting and also obtained the previous approval of the Regional Director having jurisdiction over Nidhi.

DEPOSITS
• The fixed deposits shall be accepted for a minimum period of six months and a maximum period of sixty months.
• Recurring deposits shall be accepted for a minimum period of twelve months and a maximum period of sixty
months.
• The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed one
lakh rupees at any point of time and the rate of interest shall not exceed two per cent above the rate of interest
payable on savings bank account by nationalized banks.
• A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding the maximum rate of interest
prescribed by the Reserve Bank of India which the Non-Banking Financial Companies can pay on their public
deposits.
ACCEPTANCE OF DEPOSITS
• The fixed deposits shall be accepted for a minimum period of six months and a maximum period of sixty months.
• Recurring deposits shall be accepted for a minimum period of twelve months and a maximum period of sixty
months.
• The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed one
lakh rupees at any point of time and the rate of interest shall not exceed two per cent above the rate of interest
payable on savings bank account by nationalized banks.
• A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding the maximum rate of interest
prescribed by the Reserve Bank of India which the Non-Banking Financial Companies can pay on their public
deposits.

LOANS

A Nidhi shall provide loans only to its members. The loans given to a member shall be subject to the following
limits:

• Rs.2,00,000/- where the total amount of deposits from members is less than Rs.2 crores;
• Rs.7,50,000/- where the total amount of deposits from its members more than Rs.2 crores but less than Rs.20
crores;
• Rs.12,00,000/- where the total amount of deposits from its members is more than Rs.25 crores but less than
Rs.50 crores;
• Rs.15,00,000/- where the total amount of deposits from its members is more than Rs.50 crores.

A Nidhi shall give loans to its members only against the following securities, namely gold, silver and jewellery
immovable property fixed deposit receipts, National Savings Certificates, other Government Securities and
insurance policies.

Share Capital
• Every Nidhi shall issue equity shares of the nominal value of not less than Rs.10/- each.
• No service charge shall be levied for issue of shares.
• Every Nidhi shall allot to each deposit holder at least a minimum of 10 equity shares or shares equivalent to
Rs.100/-.
• A savings account holder and a recurring deposit account holder shall at least 10 equity shares of Rs.10

Directors
• The Director shall be a member of Nidhi.
• The Director of a Nidhi shall hold office for a term up to ten consecutive years on the Board of Nidhi.
• The Director shall be eligible for re- appointment only after the expiration of two years of ceasing to be a Director.
BRANCHES
• A Nidhi may open branches, only if it has earned net profits after tax continuously during the preceding three
financial years. Nidhi may open up to three branches within the district.
• No Nidhi shall open branches or collection centers or offices or deposit centers, or by whatever name called
outside the State where its registered office is situated.
• A Nidhi shall not close any branch unless it:-
• Publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at
least thirty days prior to such closure, informing the public about such closure;
• Gives an intimation to the Registrar within thirty days of such closure.

AUDITOR
• No Nidhi Company shall appoint or re-appoint an individual as auditor for more than one term of five consecutive
years.
• No Nidhi Company shall appoint or re-appoint an audit firm as auditor for more than two terms of five consecutive
years;
• Provided that an auditor (whether an individual or an audit firm) shall be eligible for subsequent appointment
after the expiration of two years from the completion of his or its term.

DIVIDEND
A Nidhi Company shall not declare dividend exceeding twenty five per cent. or such higher amount as may be
specifically approved by the Regional Director for reasons to be recorded in writing and further subject to the
following conditions, namely:-

• an equal amount is transferred to General Reserve

• there has been no default in repayment of matured deposits and interest and
• it has complied with all the rules as applicable to Nidhi's.

Note: RBI has exempted the notified Nidhi's from the core provisions of the RBI Act and other directions applicable
to NBFCs. As on date RBI does not have any specified regulatory framework for Nidhi’s. The provisions of Section
45-IA (Compulsory Registration with RBI), Section 45-IB(Maintenance of Liquid Assets), Section 45-IC(Creation of
Reserve fund) have been exempted for Nidhi Companies.

FORM-NDH-1
• Rule 5(2) of Nidhi Rules, 2014 states that within ninety days from the close of the first financial year after its
incorporation and where applicable, the second financial year, Nidhi shall file a return of statutory compliances in
Form-NDH-1 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 with the
Registrar duly certified by a company secretary in practice or a chartered accountant in practice or a cost accountant
in practice.
• This form is filed as an attachment to general form GNL-2.
FORM NDH-2
• Rule 5(3) of Nidhi Rules, 2014 states that, if a Nidhi within a period of one year from the commencement of
these rules have less than 200 members or the ratio of Net Owned Funds to deposits is more than 1: 20, it shall
within thirty days from the close of the first financial year, apply to the Regional Director in Form NDH-2 along
with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for extension of time and the Regional
Director may consider the application and pass orders within thirty days of receipt of the application.
• A specimen of the same is here for your ready reference.
FORM- NDH-3
• Rule 21 of Nidhi Rules, 2014 states that every Nidhi company shall file half yearly return with the Registrar in Form NDH-3 along
with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within thirty days from the conclusion of each
half year duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice.

• The form has to be attached as an attachment in Form GNL-2.

THANK YOU