In the circumstances of the Indian Financial Sector, a mutual benefit society is known as Nidhi Company by the Central govt. of India which is derived from the depth of the word “treasure”. The main objective is to prepare the habit of thrift and saving among its members. It provided loans at the fewer rates comparatively than banks.
Nidhi Company Registration
Nidhi Companies are incorporated as Public Limited Company with at least 3 Directors, 7 Members, and a minimum capital of Rs.10Lakh.
It cannot issue the preference of shares during its life.
The Company should have used “Nidhi Limited” as its name.
It should have more than net-owned funds of Rs.10Lakh or more.
It should have free for deposits that are not less than 10% of the outstanding deposits.
The ratio of Net Owned Funds to deposits should not exceed the ratio of 1:20.
Functions of the Nidhi Company Loan
The functions of the Nidhi Company were given below:
Where the registered members collect their savings together.
The Nidhi Company Loan system provides the charge rate of Interest on loans to its members and offers the facility for various types of loans to its members.
The Interest charged on the loan is offered by a Nidhi Company and that is regulated by the Ministry of Corporate Affairs-MCA.
RBI and MCA specified that Nidhi Company loans cannot be more than the interest rate.
Features of Loans - Nidhi Company Loan System
The lending of money is a remarkable feature of the Nidhi Company. It has not allowed giving unsecured loans to its members and is also not allowed to do Micro Finance Business which means it is only allowed to lend secured loans to its Members only. Some of the loans which can be provided by the Nidhi Company Loan system are mentioned below:
Loan to an Individual: If the capacity stored is 2Crores then the Nidhi Company provides the loan of Rs.2Lakh to any individual.
No Unsecured loans: It has prohibited to give any unsecured loans or microfinance loans.
Gold Loan: It has one of the main businesses to provide gold loan and it is very popular for Nidhi Companies subject to certain rules and regulation which is applicable under the Nidhi Rules, 2014. But some conditions give the following:
The maximum finance against the gold loan shall be up to 80%.
The maximum repayment of the loan period shall be 1Year.
The rate of interest shall not exceed 7.5% + the maximum rate of interest on a gold loan.
If deposits do not exceed Rs.2Crore then the Nidhi Company gives the maximum amount of gold loan of Rs. 2Lakh.
Loan against immovable Property: Though it is not very famous for Nidhi Company and has some conditions. However, an option is provided throughout which Nidhi Company can pay their loans to those people who do not have the gold with them:-
The maximum loan can be Rs.2Lakh if deposits do not exceed Rs.2Crore.
The reimbursement period of the loan shall not exceed 60 months.
Loan against FDR and Deposits: Nidhi Company can give advance loans against FDR and also against the deposits kept by it. There are also some restrictions which are as follows:-
The reimbursement period under this loan shall not exceed the period of Fixed Deposit.
Nidhi Company shall be provided the maximum limit of loan up to the value of Fixed Deposit.
Loan against NSC/Government Bonds: It is not as as popular others and it is rarely used.
Vehicle Finance by Nidhi Company: Nidhi Company does not provide the vehicle finance Loan. It is allowed to Non-Banking Financial Companies (NBFC) in India.
Loan Limit of Nidhi Company
A Nidhi shall give loans to its members only and subject to the following limits of loan:
2Lakh where the total amount of deposits from members is less than Rs.2Crores;
Where the total amount of deposits from its members is more than Rs.2Crores but less than Rs.20Crores the loan provided by the Nidhi Company is Rs. 7, 50, 000/-.
Where the total amount of deposits from its members is more than Rs.25Crores but less than Rs.50Crores then the Nidhi Company provides the loan is Rs. 12,00,000/-.
Where the total amount of deposits from its members is more than Rs.50Crores then the company provides the loan is Rs. 15, 00, 000/-.
A Nidhi shall give loans to its members against the securities which given the following:—
Loans to the members shall be given against the securities of gold, silver jewelry, and any immovable property.
In the case of gold, silver, and jewelry the repayment period of such loan shall not exceed one year.
In the case of immovable property, the loan shall be given by the Nidhi Company does not exceed 50% of the value of the property offered as security and the period of repayment of this loan shall not exceed 7 years.
Exemptions and privileges under the Companies Act, 2013:
Some certain provisions shall not apply to the Nidhi Company under the Companies Act, 2013 and it would be exempted from certain provisions of the same. Service of documents to Nidhi members may be sending it to him by post or registered post or speed post or courier or delivering the same at his office or by such electronic or another mode which may be prescribed. It is free to make a private placement to any number of persons and shall not be deemed to be an offer to the public.
Conclusion
It concluded that In the circumstances of the Indian Financial sector a mutual benefit society is known as Nidhi Company by the Central govt. of India. It has main object is to prepare the habit of thrift and saving among its members. It provided loans at the fewer rates. The Nidhi Company Loan system provides the charge rate of Interest on loans to its members and offers the facility for various types of loans to its members. The Interest charged on the loan is offered by a Nidhi Company and is regulated by the Ministry of Corporate Affairs.
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