Series -I
Introduction
As per section 406 of the Companies Act, 2013, “Nidhi” means a company which has been
incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its
members, receiving deposits from, and lending to, its members only, for their mutual benefit, and
which complies with such rules as are prescribed by the Central Government for regulation of such
class of companies
The primary object of Nidhis is to carry on the business of accepting deposits and lending money to
member-borrowers only against jewels, etc., and mortgage of property. For over a century, Nidhis
with the objective of cultivating the habit of thrift, have been generally promoted by public spirited
men drawn from affluent local persons, lawyers and professionals like auditors, educationists, etc.,
including retired persons. The area of operation has been local – within municipalities and
panchayats. Some Nidhis on account of their financial and administrative strength have opened
branches within the respective revenue district and even outside. The principle of mutual benefit has
been to pool the savings from members and lend only to members and never have dealing with Nonmembers.
Such Members are only individuals. Bodies Corporate or Trusts are never to be admitted as
Members. Nidhis are not expected to engage themselves in the business of Chit Fund, hire purchase,
insurance or in any other business including investments in shares or debentures.
Incorporation of Nidhi
(1) A Nidhi to be incorporated under the Companies Act, 2013 shall be a public company and shall
have a minimum paid up equity share capital of five lakh rupees.
(2) Nidhi shall not issue preference shares.
(3) If preference shares had been issued by a Nidhi before the commencement of the Companies
Act, 2013, such preference shares shall be redeemed in accordance with the terms of issue of
such shares.
(4) No Nidhi shall have any object in its Memorandum of Association other than the object of
cultivating the habit of thrift and savings amongst its members, receiving deposits from, and
lending to, its members only, for their mutual benefit.
(5) Every Company incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its
name.
Requirements for minimum number of members and net owned funds
Sub-Rule (1) of Rule 5 of the Nidhi Rules, 2014 deals with requirements for minimum number of
members, net owned fund etc. It provides that:
(1) Every Nidhi shall, within a period of one year from the commencement of these rules, ensure
that it has—
(a) not less than two hundred members;
(b) Net Owned Funds of ten lakh rupees or more;
(c) unencumbered term deposits of not less than ten per cent of the outstanding deposits as
specified in rule 14; and
(d) ratio of Net Owned Funds to deposits of not more than 1:20.
It may be noted that “Net Owned Funds” means the aggregate of paid up equity share capital and free
reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance
sheet. Further, the amount representing the proceeds of issue of preference shares shall not be
included for calculating Net Owned Funds.
Sub Rule (3) states that if a Nidhi is not complying with clauses (a) or (d) of sub-rule (1) above, it shall
within thirty days from the close of the first financial year, apply to the Regional Director in Form
NDH-2 along with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for
extension of time and the Regional Director may consider the application and pass orders within
thirty days of receipt of the application. Sub-Rule (4) further states that if the failure to comply with
sub-rule (1) of this rule extends beyond the second financial year, Nidhi shall not accept any further
deposits from the commencement of the second financial year till it complies with the provisions
contained in sub-rule (1), besides being liable for penal consequences as provided in the Act.
Membership of Nidhi
(1) A Nidhi shall not admit a body corporate or trust as a member.
(2) Every Nidhi shall ensure that its membership is not reduced to less than two hundred
members at any time.
(3) A minor shall not be admitted as a member of Nidhi. It may be noted that deposits may be
accepted in the name of a minor, if they are made by the natural or legal guardian who is a
member of Nidhi.
Directors
(1) The Director shall be a member of Nidhi.
(2) The Director of a Nidhi shall hold office for a term up to ten consecutive years on the Board of
Nidhi.
(3) The Director shall be eligible for re-appointment only after the expiration of two years of
ceasing to be a Director.
(4) Where the tenure of any Director in any case had already been extended by the Central
Government, it shall terminate on expiry of such extended tenure.
(5) The person to be appointed as a Director shall comply with the requirements Director
Identification Number.
Share capital and allotment
(1) Every Nidhi shall issue equity shares of the nominal value of not less than ten rupees each.
(2) No service charge shall be levied for issue of shares.
(3) Every Nidhi shall allot to each deposit holder at least a minimum of ten equity shares or
shares equivalent to one hundred rupees:
It may be noted that a savings account holder and a recurring deposit account holder shall hold at
least one equity share of rupees ten.
Further, as per Rule 13 of the Nidhi Rules, 2014,
(1) The fixed deposits shall be accepted for a minimum period of six months and a maximum
period of sixty months.
(2) Recurring deposits shall be accepted for a minimum period of twelve months and a maximum
period of sixty months.
(3) In case of recurring deposits relating to mortgage loans, the maximum period of recurring
deposits shall correspond to the repayment period of such loans granted by Nidhi.
(4) The maximum balance in a savings deposit account at any given time qualifying for interest
shall not exceed one lakh rupees at any point of time and the rate of interest shall not exceed
two per cent above the rate of interest payable on savings bank account by nationalised
banks.
(5) A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding the
maximum rate of interest prescribed by the Reserve Bank of India which the Non-Banking
Financial Companies can pay on their public deposits.
Un-encumbered term deposits by Nidhi
Under Rule 14 of the Nidhi Rules, 2014, every Nidhi shall invest and continue to keep invested, in
unencumbered term deposits with a Scheduled commercial bank (other than a co-operative bank or a
regional rural bank), or post office deposits in its own name an amount which shall not be less than
ten per cent of the deposits outstanding at the close of business on the last working day of the second
preceding month. In cases of unforeseen commitments, temporary withdrawal may be permitted with
the prior approval of the Regional Director for the purpose of repayment to depositors, subject to
such conditions and time limit which may be specified by the Regional Director to ensure restoration
of the prescribed limit of ten per cent.
Loans by Nidhi
(1) A Nidhi shall provide loans only to its members.
(2) The loans given by a Nidhi to a member shall be subject to the following limits, namely:—
.
(a) two lakh rupees, where the total amount of deposits of such Nidhi from its members is
less than two crore rupees;
(b) seven lakh fifty thousand rupees, where the total amount of deposits of such Nidhi
from its members is more than two crore rupees but less than twenty crore rupees;
(c) twelve lakh rupees, where the total amount of deposits of such Nidhi from its members
is more than twenty crore rupees but less than fifty crore rupees; and
(d) fifteen lakh rupees, where the total amount of deposits of such Nidhi from its members
is more than fifty crore rupees:
Where a Nidhi has not made profits continuously in the three preceding financial years, it
shall not make any fresh loans exceeding fifty per cent of the maximum amounts of loans
specified in clauses (a), (b), (c) or (d). A member shall not be eligible for any further loan if he
has borrowed any earlier loan from the Nidhi and has defaulted in repayment of such loan.
(3) The amount of deposits shall be calculated on the basis of the last audited annual financial
statements.
(4) A Nidhi shall give loans to its members only against the following securities, namely:—
(a) gold, silver and jewellery, and the re-payment period of such loan shall not exceed one
year.
(b) immovable property and, the total loans against immovable property [excluding
mortgage loans granted on the security of property by registered mortgage, being a
registered mortgage under section 69 of the Transfer of Property Act, 1882 (IV of
1882)] shall not exceed fifty per cent of the overall loan outstanding on the date of approval by the board, the individual loan shall not exceed fifty per cent of the value of
property offered as security and the period of repayment of such loan shall not exceed
seven years.
(c) fixed deposit receipts, National Savings Certificates, other Government Securities and
insurance policies. It may be noted that such securities duly discharged shall be
pledged with Nidhi and the maturity date of such securities shall not fall beyond the
loan period or one year whichever is earlier and in the case of loan against fixed
deposits, the period of loan shall not exceed the unexpired period of the fixed deposits.
Dividend
Under Rule 18 of Nidhi Rules, a Nidhi shall not declare dividend exceeding twenty five per cent or
such higher amount as may be specifically approved by the Regional Director for reasons to be
recorded in writing and further subject to the following conditions, namely:—
(a) an equal amount is transferred to General Reserve;
(b) there has been no default in repayment of matured deposits and interest; and
(c) it has complied with all the rules as applicable to Nidhis.
Role of Company Secretary
Company Secretaries create an enabling environment for Nidhis that stimulates their effectiveness,
safeguards their autonomy and assist them in legitimately mobilizing necessary financial resources
from their members. In addition, they also have a role to play in advising and guiding the Board on the
regulatory requirements and compliances such as adherence to prudential norms, filing of necessary
returns, Directors appointment, acceptance of deposits, share capital and allotment etc.
Nidhi Rules, 2014, too authorises Company Secretaries in Practice (in addition to other professionals)
to certify half yearly return and return of statutory compliances. Also, the Registrar of companies may
utilize services of Company Secretaries in Practice while discharging his functions under the Rule.
