Q1. What is Nidhi Company?

A public business incorporated under the Companies Act to encourage members to save money by receiving deposits from members and lending money to members. Benefit Fund, Mutual Benefit Company, Mutual Benefit Fund, and Permanent Fund are some of the other names for the same thing.

Q2. Why start a Nidhi Company?

1. No prior experience necessary — Unlike other NBFCs or banks, Nidhi may be formed by a fresh entrepreneur with no prior financial experience.
2. There are fewer members to begin with — only seven.
3. Low initial investment – just 5 lakh is required to get started.
4. There are fewer restrictions and compliance requirements because only members are engaged.

Q3. What is the benefit of becoming a member of Nidhi Company?

1. Easy to obtain a loan – Because only members are eligible to borrow, this is a simple process.
2. Investment security – as compared to an unregulated market.
3. In comparison to other banking institutions, there is a lower rate of interest on borrowing and a greater rate of interest on deposits.

Q4. What is the minimum requirement of starting a Nidhi Company?

1. Minimum of 7 members/shareholders – 200 within the first year of operation
2. Minimum of three directors (can be shareholders or others)
3. Minimum capital of 5 Lakh – should reach 10 Lakh within a year (including reserves and profits)
4. Name – “………….. Nidhi Limited”

Q5. Who regulates Nidhi Company?

1. Nidhi company is registered under the Companies Act 2013 of the Ministry of Corporate Affairs (MCA), but it is exempted from some of the provisions of the act to ease the Nidhi business.
2. Government – Nidhi Rules 2014 – and it also issues regulations regularly.
3. RBI – While a Nidhi firm is a sort of NBFC, it does not require RBI clearance and is excluded from the majority of NBFC laws, as well as having the least amount of RBI interference.

Q6. Does there any rules regarding taking deposits from members?

Yes, there are a few restrictions that must be observed while accepting deposits from members, and they are as follows:

1. Members’ deposits shall not exceed 20 times the company’s net owned fund (Capital + free reserve and surplus + profit – loss), i.e. if the company’s fund is INR 100, it can take deposits up to INR 2000 (100*20).
2. A member’s fixed deposit might range from 6 months to 5 years (60 months)
3. Members can make recurring instalments for a minimum of one year (12 months) and a maximum of five years (60 months)
4. Interest on fixed deposits and recurring deposits is limited to the amount set by the RBI. It is currently 12.5 per cent.
5. Savings Deposits – Interest cannot be more than 2% more than the nationalised bank’s interest rate. (At the moment, 4% Plus 2% equals 6%.)

Q7. Are there rules regarding lending the money to members?

The interest rate on a loan cannot be more than 7.5 per cent more than the Nidhi company’s maximum interest rate on deposits. For example, if Nidhi Company pays 12.5% interest on FDs, 10% on RDs, and 6% on savings, the interest rate on a loan cannot exceed 20%. Microfinance or unsecured loans are not available to Nidhi members. A Nidhi company’s maximum lending limit to a single member is proportional to its total deposits.

Amount of Deposit (in Rs.)	Loan Limit to a single member
Less than 2 Crore	2 lakh
2 – 20 Crore	7.5 Lakh
20 – 50 Crore	12 Lakh
More than 50 Crore	15 lakh

Q8. Can Nidhi Company give loans or take deposits from any other person than members?

NO.

Q9. Can Nidhi Company advertise?

NO.

Q10. Can Nidhi company do any other business?

NO.

Q11. Can Nidhi company open a current account for its member?

NO.

Q12. What other things are not allowed for Nidhi Company?

• By issuing preferred shares or debentures, a Nidhi Company cannot provide any member special treatment.
• Nidhi cannot impose membership fees or trading commissions for bringing deposits or making loans.

Q13. Can Nidhi Company take or give loans to its member at different rates on the same type of loan?

No, there should be no differences among its members; the same interest rate on the same type of loan and deposit is required. Also, the same should be published at the office on the bulletin board and the application form.

Q14. What is the interest method used for loans by the Nidhi company?

Interest should be calculated using the declining balance approach. i.e., interest will be levied on the balance owing amount with each payment.

Q15. How many shares a member should have?

A member must have a minimum of 10 shares or a share value of Rs 100/- to be eligible. The nominal value of a share (printed on it) shall not be less than INR 10 /

Q16. Can Nidhi company invest money in the security market?

No, Nidhi Company cannot invest in the stock market or private bonds. They are limited to investing in government-issued stocks and bonds.

Q17. Can Nidhi Company have any Branches?

Yes, however, it may only open a branch after three consecutive years of profit.