Nidhi Company is a non-banking financial business structure. Nidhi Company performs the functions of lending and borrowing of money within its members where it works through its members only. Nidhi Company is also called as a mutual benefit company. Nidhi Company promotes the art of saving and utilization of funds within its member community. Nidhi company does not require a license of Reserve Bank of India. Companies doing Nidhi Business are also known as Nidhi, Permanent fund, Benefit funds, Mutual Benefit Funds, and Mutual Benefit company. Nidhi Company is recognized under section 406 of the Companies Act, 2013. It is a business structure which comes under 20A of the Companies act,1956 and ruled by the Ministry of Corporative Affairs(MCA).
In developing countries like India, these small scale industries are the lifeline of the economy. These are generally labour-intensive industries, so they create much employment. They also help with per capita income and resource utilization in the economy. They are a very important sector of the economy from a financial and social point of view.
Basic Structure of Nidhi company
- It is a type of public limited company
- Only members are allowed to lend and borrow money.
- Legalized through the Ministry of Corporate affairs
- It doesn’t need any approval of RBI. But it has right to question related to deposit acceptance activities.
- To start Nidhi Company 5 lakh minimum capital is required
- Established in 2014, Governed under Nidhi rules.
- There should be at least 200 members to incorporate in Nidhi Company.
- There should be at least Rs.10/- to the members of a Nidhi company that is approved with equity share.
Functions of Nidhi company
- The rules of funding in a Nidhi company is done through the contribution of its forming members.
- Later that money is used to offer loans to its own members according to their needs at very reasonable rates.
- The funds or deposits of a Nidhi company are limited when compared with other banks because they are only able to operate their as they will be working with specific fund base in a limited area.
Some Following function are done like providing loans to its members, collects deposit from its member, loans are focused to the limits of funds raised by the member.
The purpose of Nidhi company is to give growth and support to small scale companies and tell them about habit of saving and working for the benefit of their own members by lending, receiving deposits etc..