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Nidhi Company is defined under section 406, which lays down as below:
Nidhi means a company which has been incorporated with the object of cultivating the habit of savings amongst its members, receiving deposits from, and lending to, its members. Nidhi Companies are registered for the mutual benefit of their members.
Since the main businesses of Nidhi companies are borrowing from or lending to Members, Nidhi companies come under the definition of NBFC company, so it comes under the radar of RBI.
But, Nidhi companies dealings are restricted to only its members, so these Companies enjoy exemptions from core provisions of the RBI Act, viz.
Requirement of Nidhi company registration, maintenance of liquid assets and creation of reserve fund, and RBI Directions, but again exemption related to the interest rate on deposits, prohibition from paying brokerage on deposits, a ban on advertisements and the requirement to submit Returns.
Since Nidhi companies are incorporated as public limited companies, all the requirements applicable to incorporate a public limited company shall apply to Nidhi companies.
Therefore, incorporating a public limited company is the first step to starting Nidhi's business.
As per rule 6 of Nidhi rules, 2014, there are certain prohibitions on activities of Nidhi companies:
Also read: Types of Corporations for Company Registration in Canada
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.