What is the meaning of Nidhi Company?

A loan company is a non-banking financial company (NBFC) whose members can borrow and lend. It works on the principle of mutual benefit and promotes savings habits among its members. These companies are mostly in Southern India. It is very easy for a Nidhi company to get a license from the Reserve Bank of India (RBI), which makes it different from other NBFCs. It is a public company and its name must be “Nidhi Limited”.

Nidhi companies are prohibited from conducting chit funds, hire-purchase finance, leasing, insurance or securities trading. They are also prohibited from borrowing or accepting deposits from anyone other than their members. Also, they are not allowed to promote deposits.

Requirements to start a Nidhi company:
A Nidhi company needs at least seven members and at least three directors. The company must have an initial equity share capital of at least Rs five lakh. Nidhi companies have the right not to issue preference shares.

Documents required to register a Nidhi Company
The following documents are required to register a Nidhi Company:

• Proof of Registered Office (Ownership Document, Rent or Lease Agreement)
• No Objection Certificate (NOC) from property owner or landlord
• Proof of Identity of Members
• Proof of Address of Members
• Digital Signature Certificate (DSC)
• Director Identification Number (DIN) Memorandum of Association (MoA)
• Article of Association (AoA), Memorandum of Company (MoA)