Nidhi Companies

About Nidhi Companies:

• A NIDHI Company is recognised under Section 406 of the Companies Act 2013 and typically operates in the Non-Banking Financing Sector of India.

• It is formed to borrow and lend money to its members. It inculcates the habit of saving among its members and works on the principle of mutual benefit. 

• It is not required to receive the license from the Reserve Bank of India (RBI), as these are registered with the Companies Act.
• Members: A minimum of seven members is required to start a Nidhi Company out of which three members must be the directors of the company.
• Activities Prohibited in a Nidhi Company

• It can’t deal with chit funds, hire-purchase finance, leasing finance, insurance or securities business. 
• It is strictly prohibited from accepting deposits from or lending funds to, any other person except members.
• Nidhi companies should not issue preference shares, debentures or any other debt instrument in any manner, name or form.
• Nidhi companies should not open current accounts with their members.