Formation

It requires only 7 members out of which 3 members would be the directors. Nidhi Company does not require to obtain a licence from RBI.

Capital required for registration

The minimum capital requirement for the registration of Nidhi company is 10,00,000 Rs. only at the time of incorporation. 

Limited RBI Regulations

Nidhi Company though it is a finance company and falls under the category of NBFC, does not require approval of RBI. Nidhi Companies are exempted from main provisions otherwise applicable to an NBFC in India. These companies follow Nidhi rules 2014 issued by the center in respect of the activity and working of the company.

No outsider intervention

The Nidhi Companies are formed, managed and provides benefits only to their members. The outsider will not be allowed to intervene in Nidhi on any ways. Be it working of the Nidhi companies or depositing money with them or even avail credit from Nidhi. There would be no external intervention in the management as well.

Benefits to the members

Nidhi Company works with the objective of increasing savings of its members. It is very easy to make donations and get loans from the company for its members. The loans given to the members at a lower rate compared to the market rate hence it attracts the members to do more savings. The net owned fund ratio of Nidhi Company is 1:20. That means you invest 1 rupee and you will get a deposit of 20 rupees. The investments in the Nihi Company are secured ones. The risk of non payment of loans is less as compared to other finance businesses.

Exemptions and privileges under the Companies Act,2013

Accordingly certain provisions of the Companies Act,2013 shall not apply to the Nidhi Company and Nidhi would be exempted from certain provisions of the same. Service of documents to Nidhi members may be done by sending it to him by post or by registered post or by speed post or by courier or by delivering the same at his office or by such electronic or othermode as may be prescribed. A Nidhi Company is free to make a private placement to any number of persons and it shall not be deemed to be an offer to the public. Nidhi Company offers a lot of advantages to its members, however it is not aloof from certain drawbacks also which are mentioned below.

Limited Fund Raising

The Nidhi company accepts deposits of the members only hence the funds of the Nidhi company are very limited as compared to other finance companies.

Limited credit availability

As the funds raised are limited the availability of the credit will also be limited as compared to the other finance companies.

RBI vigilance

Though the Nidhi Companies are free from the strict compliance of the RBI regulations, their deposit acceptance operations are governed by the RBI. The central government issues rules and directions governing Nidhi Companies from time to time. Therefore, they are not totally exempt from the regulatory framework.