Nowadays, Nidhi Company has evolved as a popular lending mechanism for obtaining secured loans. These companies are most predominant in the Southern Parts of India. Moreover, the operations and the affairs of this company is very much similar to that of a Co-operative Society. Further, section 406 of the Companies Act, 2013, deals with the process of Nidhi Company Registration.
Furthermore, the prime reason behind incorporating this business structure is to encourage and motivate its members to save, so that they can smoothly and with ease satisfy their financial needs arising from time to time. Hence, this company is based on the principle of Mutual Benefits.
What is a Nidhi Company?
The term Nidhi Company refers to a type of NBFC (Non-Banking Financial Corporation) which is regulated and governed by the provisions of the Companies Act, 2013. The only significant feature that differentiates this Company from other companies is that this business structure deals with the deposits from and loans to its members, i.e., shareholders only, and works just for the mutual benefits of its members.
Further, it shall be noteworthy to take into consideration that the activities of this business structure do fall under the ambit of RBI (Reserve Bank of India), as it is similar to that of an NBFC. However, RBI has excused this Company from the core provisions of the RBI Act, 1934 and other regulations prevalent on an NBFC, as these Companies deals only with the money of its shareholders or members.
Benefits of a Nidhi Company
Cheaper To Borrow:As a member, one can borrow money at a minimum rate, relative to the rate at which banks lend money. This can be a major advantage in times of need, as different individuals in the mutual benefit society are likely to need funds at different points in time.
Encourages Savings:It encourages all its members to save money and encourages a thrifty lifestyle. A Nidhi Company, after all, is a mutual benefit society wherein members can lend or borrow money and accept financial aid amongst them.
Fewer Complications:Borrowing and lending to known persons, where the procedure is fixed, is much less complicated than dealing with banks or in an informal setting. A Nidhi Company enables its members to unlock the potential of their money and gain from lower interest rates when they require money themselves.
Documents Required for Nidhi Company Registration
To Be Submitted By All Directors
- Self-attested copy of PAN Card
- Self-attested copy of Driver’s License/ Voter ID/ Aadhaar Card/Passport
- Self-attested copy of Bank Statement/ Telephone Bill/Mobile Bill/ Electricity Bill
- Passport-size Photograph
- Specimen Signature Certificate
