• Cheaper To Borrow: As a member, one can borrow money at a minimum rate, relative to the rate at which banks lend money. This can be a major advantage in times of need, as different individuals in the mutual benefit society are likely to need funds at different points in time.
• Encourages Savings: It encourages all its members to save money and encourages a thrifty lifestyle. A Nidhi Company, after all, is a mutual benefit society wherein members can lend or borrow money and accept financial aid amongst them.
• Fewer Complications: Borrowing and lending to known persons, where the procedure is fixed, is much less complicated than dealing with banks or in an informal setting. A Nidhi Company enables its members to unlock the potential of their money and gain from lower interest rates when they require money themselves.

Checklist For A Nidhi Company

• At least seven members are mandatory to form a Nidhi company. Out of these, three should be designated as the directors. However, it should acquire a minimum of 200 members within one year of commencement.
• Moreover, the company should have a minimum equity share capital of Rs 5 lakhs, for registering as a Nidhi Company. This entire amount has to be paid up. However, the Net Owned Funds (NOF) must be increased to Rs 10 lakhs within a year of registration.
  • a. At least 10% of its outstanding deposits should comprise of un-encumbered term deposits.
  • b. The prescribed NOF to deposits ratio should be 1:20.
  This includes equity share capital and free reserves and excludes accumulated losses as well as intangible assets.
• At least 10% of its outstanding deposits should comprise of un-encumbered term deposits
• The prescribed NOF to deposits ratio should be 1:20. where 10% of the total deposits are in a fixed deposit account of a nationalized bank.

What are the 10 things Nidhi Companies cannot do as an NBFC (Non-Banking Financial Company)?

A Nidhi company cannot deal in the following –

• Chit fund business
• Hire purchase finance
• Acquisition/insurance of securities issued by any corporate
• Engaging as an NBFC in the business of advances or loans
• Leasing finance
• Acquisition of stocks/shares /bonds/securities/debentures issued by any local authority /Govt./marketable securities