All that you need to know about Nidhi Company

All that you need to know about Nidhi Company

What is Nidhi Company?

As per the Companies Act, 2005, when a company is duly recognized then it is referred as Nidhi Company. In case of such companies, the transactions can be conducted with the members only. As far as borrowing and lending of money are concerned, it can be done with the members. The capital accumulated for a Nidhi company is acquired from its members itself.

How to incorporate Nidhi Company?

There are several requirements that have to be fulfilled to incorporate a Nidhi company. These are:-

1. There shall be at least 3 directors and 7 shareholders.
2. The target of these companies should be to give somebody the loan and/or borrow money. This has to be done with their members only.
3. The purpose should be to mutually benefit all the financial deal the company takes part in with their shareholders.

What are the criteria that have to be met after incorporation?

When the company is successfully incorporated then after a year, the subsequent criterion should be fulfilled. Net owned Funds refers to the paid-up Equity share capital in addition to free reserves, but minus the accumulated losses and Intangible Assets.

1. Firstly, it is mandatory to have 200 or more than 200 shareholders.
2. In case of unregulated deposits, the deposit by no means should be below 10% of the outstanding deposit
3. The total funds owned should not be below 10 lakhs.
4. The total funds owned ratio to deposits ratio should not be beyond 1:20 ratio.

What happens when the criteria are fulfilled?

When the company acts in accordance with the required conditions, then the company will arrange a schedule in order to return the due of the legal assets as mentioned in from NDH-1. On the ROC site, the company will have to pay the required fee in three months from the end of the financial year.

What happens when the criteria are not fulfilled?

When the requirements are not fulfilled by the end of one year, then:

1. The company shall submit an application in order to expand the time period directed to the Regional Director in form NDH-2.
2. Furthermore, the company will be given a supplementary time period of 30 days. The company is expected to meet the terms of the above criteria within this time period.
3. However, on failure to fulfill the conditions even after the end of the additional time period, the company will be forbidden from acknowledging any further financial deposits. This condition will be applicable until it successfully fulfills all the criteria required for incorporation, In addition, a penalty is also forced on such a company.

Loans approved by Nidhi Company

One of the major features of Nidhi Company is Fund lending. Some of the essential points are as follows:

1. When the deposit is inferior to 2 Crores, then the highest amount of loan that is approved by an individual shall not surpass Rs. 2,00,000. In case of a susceptible loan or microfinance loans then a Nidhi Company is not eligible to sanction any loans.
2. In case of a gold loan, the unmost interval of time till which the loan is sanctioned is 1 year.
3. In case of property loans, the repayment interval shall not exceed 7 years.
4. The highest gold loan that can be approved should not be more than eighty percent of the cost of the gold
5. The highest amount of loan sanctioned against a property shall not surpass fifty percent of the value of the property.
6. In addition, a Nidhi Company is not eligible sanction vehicle loans.

Interest rates applicable when deposits are made

As far as deposits are concerned, there are three categories on which the interest is granted. These are as follows:

1. In case of fixed deposits or FD, the highest fee shall not surpass the tariff granted by the NBFC. The rate fixed by NBFC is 12.5%.

2. In case of Recurring deposit or RD, the highest fee shall not surpass the tariff granted by the NBFC. The rate fixed by NBFC is 12.5%.

Interest Rates as applicable to loans

A Nidhi company provides three types of loans. These are as follows:

1. First, there is Gold and/or Silver loan. Here the highest rate has to be 7.5% in addition to the maximum rate applicable to deposits. To clarify it further, it should be like- 7.5% + 12.5% = 20%.
2. Then there is Property Loan. Here the highest rate has to be 7.5% in addition to the maximum rate applicable to deposits. To clarify it further, it should be like- 7.5% + 12.5% = 20%.
3. Furthermore, there are other loans which are sanctioned as well. Here the highest rate has to be 7.5% in addition to the maximum rate applicable to deposits. To clarify it further, it should be -like-7.5% + 12.5% = 20%.

Approval of Deposits as per rules of Nidhi Company

One of the many features of a Nidhi Company is approval of deposits.In order to enjoy such benefits, one must abide by the Nidhi company rules. There are some few important points listed below: Thus, “All that you need to know about Nidhi Company”, can be considered important. When an individual wants to deposit, accept and lend money, provided the clauses are met.

1. When a fixed deposit is concerned, the deposit can be acknowledged for at least 6 months and the highest duration of 60 months.
2. When a recurring deposit is concerned, the deposit can be acknowledged for at least 12 months and the highest duration of 60 months.
3. As far as a savings account is concerned, the highest balance on which the interest is imposed shall not surpass Rs. 100,000.
4. In case of repayment of deposits, the following conditions should be followed.
   a) Deposits cannot be repaid within a duration of 3 months.
   b) In case of deposits which are reimbursed prior to maturity, then the interest granted shall be cut down by 2 percent.