A Nidhi Company is recognized under section 406 of the Companies Act, 2013. Their core
business is borrowing and lending money between their members. They are also known as
Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company. Nidhi
companies are allowed to take deposit from its members and lend to its members only. Therefore,
the funds contributed for a Nidhi company are only from its members (shareholders) and used only
by the shareholders of the Nidhi Company. They are regulated by Ministry of Corporate
Affairs. Reserve Bank of India is empowered to issue directions to them in matters relating to their
deposit acceptance activities. However, in recognition of the fact that these companies deal with
their shareholder-members only.
The basic concept of Nidhi is "Principle of Mutuality" ("Paraspara Sahayata"). 80% of the Nidhi
Companies are located in Tamil Nadu, these companies existed before Companies Act 1956. Nidhi
Companies function for the common benefit advantage of all their member/share holders.
2). What are the Governing Laws of Nidhi Company ?
Nidhi companies is governed by Nidhi Rules, 2014. They are incorporated in the nature of Public
Limited company and hence, they have to comply with two set of norms, one of Public limited
company as per Companies Act, 2013 and another is for Nidhi rules, 2014. No RBI approval is
necessary to register the company, as RBI has specifically exempted this category of NBFC in India
to comply with its core provisions such as registration with RBI etc. Every Nidhi shall, within a period
of one year from the commencement must ensure that it has not less than 200 members.
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