In the Indian NBFC (Non Banking Financial Company) sector, Mutual Benefit Company is a distinct name. It is also known as the Nidhi Company and Mutual Benefit Fund. A nidhi company can take deposits from its members and offer money to them. The intension of Nidhi Company is to develop the propensity for frugality and savings among its members.
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Nidhi Companies provide loans to the members only. It can have up to 200 members. These members invest money in here and the amount can be utilized for lending and borrowing process. No outsider of the company can be involved into taking or providing loans.
As the Nidhi Company registration process is extremely simple and easy, many prefer it to venture into the financial business sector. Although there are some rules and regulations must be followed if people are intended to run the same legibly.
What Nidhi Companies are permitted to Do ?
Nidhi Companies are allowed to perform duties in the following areas.
- Up to Rs.2 lakhs loan amount can be provided to the members if their deposit amount is less than Rs.2 Crore.
- Up to Rs.7.5 lakhs loan can be given to the members if their deposit amount is less than Rs.20 Crore but greater than Rs.2 Crore.
- Up to Rs.12 lakhs loan can be given to the members if their deposit amount is less than Rs.50 Crore but greater than Rs.25 Crore.
- Up to Rs.15 lakhs loan can be given to the members if their deposit amount is more than Rs.50 Crore.
Nidhi Company can provide loan against gold under some permitted conditions to its members. The rules are mentioned below.
- Up to 80% loan against gold can be provided.
- The repayment period must not exceed 12 months term.
- Rates of Interest for the loan cannot be surpassed to 7.5% plus maximum rate of gold loan.
- If the deposit amount is not surpassed Rs.2 Crore, then up to Rs.2 lakhs loan amount can be provided.
Nidhi Companies also provide loans against immovable properties under the below stated conditions.
- Maximum loan amount of Rs.2 lakhs can be provided if the deposit amount is not surpassed by Rs.2 Crore.
- Up to 60 months loan repayment term is acceptable.
- Maximum finance amount must not exceed 50% of the property value.
Loan against Deposits and FDR are also allowed in Nidhi Company under the following conditions.
- The maximum loan amount can be up to the FD amount under the respective Nidhi Company.
- The repayment period under this credit will not surpass the term of Fixed Deposit.
Comprehensive Restrictions of Nidhi Company
As per the Nidhi Rules 2014 and 2019, Nidhi Companies are restricted to involve in the following activities.
- Commence Current Account with the members.
- Change in the management group of the Company without following proper guidelines.
- Conduct business on Hire Purchase, Chit Fund, lease, acquisition and Insurance of securities that are distributed by corporate.
- Conduct businesses other than leading and borrowing.
- Obtain deposits and provide lending services to any outsider or corporate body.
- Substantiates any resource of the member as security.
- Compensates any member for their deposits or loans.
- Provide unsecured form of loans to the members.
- Offer vehicle loans to the members.
Frequently Asked Questions (FAQ) about the Work Process of Nidhi Limted
- How to become a member of Nidhi Company?
Anyone who is above 18 years of age can apply for Nidhi Company membership. She/he must furnish valid age proof as well as Identity and address proof at the time of application.
- Can anyone apply for Nidhi Company Membership as a Minor?
Although a minor is not eligible to get membership in Nidhi Company, they can deposit money under certain condition. One member of the Nidhi must be the legal or natural guardian of the minor. Only then the company can accept deposits under the minor’s name.
- How a member can apply for loan in the Nidhi Company ?
A member must deposit or provide some collaterals like immovable property, Gold or silver jewellery and any other kinds of financial securities to apply for loan.
- Are the deposits of the members are safe in Nidhi Company ?
The Ministry and Corporate Affairs and Reserve Bank of India have set some strict rules and guidelines to protect and ensure safety the deposits. All Nidhi Company must comply with those regulations. Hence, the member’s deposits are completely safe and secure.
