A Nidhi Company is a financial company that is registered under the Companies Act, 2013 and is regulated by the National Housing Bank (NHB). Nidhi Companies are specifically allowed to accept deposits from members and lend money to members for mutual benefit.
To be eligible for registration as a Nidhi company, the company must meet the following requirements:
- It must have a minimum of 7 members.
- It must have a minimum paid-up capital of ₹5 lakhs.
- It must have a minimum net owned fund of ₹10 lakhs.
- It must not issue preference shares.
- Its object must be to cultivate the habit of thrift and savings amongst its members and receiving deposits from and lending to its members for their mutual benefits.
- Its name must end with the words “Nidhi Limited”.
Once registered as a Nidhi company, it can start accepting deposits from members and lending money to members. The interest rates that Nidhi companies can offer on deposits and charge on loans are regulated by the MCA.
Here are some important points:
- Lending Rate
The lending rate of a Nidhi Company is the interest rate that it charges on loans that it provides to its members. The lending rate is typically higher than the deposit rate, as Nidhi Companies need to cover their operating costs and make a profit.
- Deposit Rate
The deposit rate of a Nidhi Company is the interest rate that it pays on deposits that it receives from its members. The deposit rate is typically lower than the lending rate, as Nidhi Companies need to make a profit.
- Interest Rate
The interest rate of a Nidhi Company is the difference between the lending rate and the deposit rate. The interest rate is how Nidhi Companies make money.
Nidhi Companies are eligible for a number of tax benefits, including:
- Exemption from income tax on interest income earned on deposits.
- Exemption from dividend distribution tax.
- Deduction of expenses incurred on the maintenance of the company.
Nidhi Companies can be a good option for investors who are looking for a safe and secure investment option with the potential for higher returns than traditional bank deposits. However, it is important to do your research before investing in any Nidhi Company, as there have been a number of cases of fraud in the past.
Here are some of the factors to consider before investing in a Nidhi Company:
- The company’s track record.
- The company’s financial health.
- The company’s management team.
- The company’s investment objectives.
- The company’s fees and charges.
Here are some of the benefits of investing in a Nidhi company:
- Safety: Nidhi companies are regulated by the MCA, which means that they are subject to certain rules and regulations that are designed to protect the interests of investors.
- Security: Nidhi companies are required to maintain a minimum liquidity ratio of 20%, which means that they have enough cash on hand to meet their obligations to their investors.
- Potential for higher returns: Nidhi companies can offer higher interest rates on deposits than traditional bank deposits.
- Tax benefits: Nidhi companies are eligible for a number of tax benefits, including exemption from income tax on interest income earned on deposits.
Here are some of the risks of investing in a Nidhi company:
- Fraud: There have been a number of cases of fraud involving Nidhi companies in the past.
- Liquidity: Nidhi companies may not be able to meet their obligations to their investors if they experience a sudden surge in withdrawals.
- Interest rate risk: The interest rates that Nidhi companies offer on deposits and charge on loans can fluctuate, which can impact the returns that investors earn.
Overall, Nidhi companies can be a good option for investors who are looking for a safe and secure investment with the potential for higher returns than traditional bank deposits. However, it is important to do your research before investing in any Nidhi company, as there have been a number of cases of fraud in the past.
