A Nidhi Company is a type of non-banking financial company (NBFC) that is recognized under the Companies Act, 2013 and regulated by the Ministry of Corporate Affairs (MCA) in India. Nidhi companies primarily deal with the borrowing and lending of money between their members.

The main objective of a Nidhi company is to promote savings and encourage thrift among its members. Members of a Nidhi company are typically individuals from the same locality or community who contribute to a common fund, which is then lent out to members of the company at a reasonable rate of interest.

To be classified as a Nidhi company, the company must comply with certain regulations set by the MCA, including having a minimum of 200 members, maintaining a minimum net owned funds of Rs. 10 lakh, and restricting the acceptance of deposits to its members only.

Nidhi companies are not allowed to engage in any other business activity apart from borrowing and lending money among its members. They are also not allowed to issue any preference shares, debentures or any other securities, and are required to maintain strict compliance with the regulations set by the MCA.

Advantages of Nidhi Company:

The following are some advantages of a Nidhi Company:

1. Easy Formation: The formation of a Nidhi company is relatively easy and can be done with minimal legal formalities.

2. Limited Liability: The liability of the members of a Nidhi company is limited to the extent of their share capital contribution.

3. No External Influence: Nidhi companies are controlled and managed by their members, which ensures that there is no external influence on the company's operations.

4. Small-Savings Oriented: Nidhi companies primarily target small savers who are unable to access formal banking services. This helps to mobilize savings and promote financial inclusion.

5. Low Cost of Borrowing: Since Nidhi companies primarily lend to their members, they can offer loans at a lower rate of interest compared to traditional lenders.

6. No RBI Approval Required: Unlike other types of NBFCs, Nidhi companies do not require prior approval from the Reserve Bank of India (RBI) to commence operations.

7. Tax Benefits: Nidhi companies are eligible for various tax benefits, including exemptions from dividend distribution tax and tax on interest income earned from lending activities.

It is important to note that while Nidhi companies offer several advantages, they must comply with the regulations set by the Ministry of Corporate Affairs (MCA) to avoid any legal or regulatory issues.

Registration process for Nidhi Company: -

The following is the registration process for a Nidhi Company in Indi

1. Obtain Digital Signature Certificate (DSC): The first step in the registration process is to obtain a DSC for all the proposed directors of the company. A DSC is required for online submission of forms.

2. Apply for Director Identification Number (DIN): Once the DSC is obtained, the next step is to apply for a DIN for all proposed directors of the company. A DIN is a unique identification number assigned to each director by the Ministry of Corporate Affairs (MCA).

3. Apply for Name Approval: After obtaining the DIN, the next step is to apply for name approval of the proposed company. The name of the company should comply with the guidelines set by the MCA.

4. Drafting of Memorandum of Association (MOA) and Articles of Association (AOA): Once the name is approved, the MOA and AOA of the company must be drafted. These documents define the objectives and rules of the company.

5. Filing of Incorporation Forms: Once the MOA and AOA are drafted, the next step is to file incorporation forms with the MCA. The forms include SPICe (Simplified Proforma for Incorporating Company Electronically) and URC-1 (Application by a company for registration under section 406 of the Companies Act, 2013).

6. Obtain Certificate of Incorporation: Once the incorporation forms are approved by the MCA, the company is issued a Certificate of Incorporation. This certificate indicates the formation of the company and the date of incorporation.

7. Apply for PAN and TAN: After obtaining the Certificate of Incorporation, the company must apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.

It is important to note that the registration process may take anywhere between 20-30 days, depending on the MCA's processing time. Also, the company must comply with the regulations set by the MCA after incorporation to avoid any legal or regulatory issues.

Objectives of Nidhi Company

The main objective of a Nidhi Company is to promote the habit of saving and thrift among its members and to lend money to its members at a reasonable rate of interest.

Here are some more specific objectives of a Nidhi Company:

• To encourage and promote small savings among its members.
• To accept deposits and provide loans to its members.
• To provide financial assistance for various purposes such as education, marriage, housing, and business.
• To ensure that members have access to credit facilities at reasonable rates of interest.
• To promote financial inclusion and provide access to banking services to underserved and unbanked communities.
• To provide a platform for members to pool their resources and collaborate for mutual benefit.
• To create a sense of belonging and trust among members through the promotion of mutual cooperation and support.

It is important to note that a Nidhi Company is primarily formed for the benefit of its members, and therefore its operations are restricted to the borrowing and lending of money among its members only. The company is not allowed to engage in any other business activity or accept deposits from non-members.