How to start a Nidhi Company in Jaipur?

Savings is something that our Indian households thrive on. To inculcate that habit further there are many institutions like banks, finance companies. There are also Non-Banking Finance Companies which are quite popular these days. The meaning of Nidhi is treasure, Today we will see that what all it takes to start a Nidhi Company and why having a “Treasure” aka Nidhi Company is a great idea in royal city of Jaipur. So, let us get started.

What are Nidhi Companies?

Before getting into the details of what is the regulatory framework for starting a Nidhi Company. First of all let us take an overview of Nidhi Companies’ working and its business. Nidhi Company is a company that has been declared so under section 406 of the Companies Act.

As per latest reports, there are 257-300 Nidhi Companies in the country. The core business of a nidhi company is to borrow and lend money to its members only. A nidhi company can take deposits from its members and offer money to them.

The entity behind the veil of Nidhi Company is a Mutual Benefit Finance Company, so there are regulations both from RBI and Central Government i.e., Companies Act. However, there is no license required from RBI but regulations are there so as to ensure safety of people’s money.

Why to have a Nidhi Company in Jaipur?

Jaipur is famously known as Pink City of India. It has always been a city with booming business opportunities. The city of Jaipur is being preferred to start a Nidhi Company as not only people are ready to invest but also are looking for loans to set up or expand businesses. Also setting up Nidhi Company is an easy and simple process and professional services are also available at affordable rates. Nidhi Company is not directly controlled by RBI and is an easy way to establish oneself as a trustworthy business partner in a market like Jaipur.

Resources are available at cheaper rates in the city. Indian Capital is also easily accessible from Jaipur for any legal and other formalities.

Legal Requirements for starting a Nidhi Company

As people’s money is involved, there ought to be certain regulatory framework to be followed to start and run a Nidhi Company. The overview of rules and regulations that a Nidhi Company needs to abide by are-

• Minimum Capital Requirement- A Nidhi Company should have minimum paid-up equity share capital of Rs.5 lakhs. There cannot be any preference shares issued by a Nidhi Company. The Nidhi Company will have the status of a public limited company.
• Members – At the time of Incorporation a Nidhi Company should have at least 7 members and 3 members out of these can be directors of the Nidhi Company.
• Directors- The director of a Nidhi Company can hold his office for a period of 10 consecutive years. The person appointed as director should fulfil the conditions for qualification and disqualification of directors as per Companies Act. The director is eligible for re-appointment after 2 years of being a director.
• Digital Signature- As all the documents need to be self-attested the digital signature should be obtained for all the members at the time of incorporation.
• Name of the Company- The name of any Nidhi Company should end with Nidhi Limited. The name of the Nidhi Company has to be obtained as per provisions of the Companies Act. The name should not match with or should not be suggestive of any other company. The company should choose a name and wait for its approval.
• Incorporation- Now, the registration of a Nidhi Company can be applied through form SPICe+. The application should have Memorandum of Association and Articles of Association of Nidhi Company. The declaration from directors under form DIR-2 should also be submitted along with application. If the application is found in order, Certificate of Incorporation is issued.
• Application for PAN and TAN- As Nidhi Company is a separate entity; it should apply for its own PAN and TAN number.

Documents required for starting a Nidhi Company

Following set of documents are required for a Nidhi Company

• ID Proof of Members
• PAN Card of Members as well as directors
• Any utility bill
• Copy of rental agreement if premise is rented
• Passport size photo
• Present Address Proof

Regulations on Lending Money or Taking Deposits

• The schemes offered by Nidhi Company can only be availed by its members.
• The loans and deposits should be well within the specified limits prescribed by law.
• Interest on Loans will be dependent on the interest given on deposits; it cannot be more than 7.5% of the interest given on deposits.
• Even if you are a member, the loan will be provided against a security of say, property, bank deposits, gold etc.
• If a member wants to avail loan again then the first loan must be repaid.

Now to lend money, first deposits need to be taken. So a Nidhi Company-

• Can accept deposits up to 20 times of its net owned funds.
• The deposits can be taken in the form of Fixed/Recurring/Saving Deposits
• The deposits can be accepted only from its members.

Minimum requirements at the end of first year

We discussed earlier, that a minimum capital of Rs.5 lakhs is required at the time of incorporation. However, Nidhi Company needs to fulfill following conditions as it proceeds towards the end of its first year-

• The net owned funds of the company of the company should be Rs.10 lakhs or more within one year.
• The ratio of the net owned fund to deposit should be 1:20. If the amount invested in the business is INR 10 lakh, then the deposit limit should be INR 2 Crore.
• The company should make deposits for at least 10% of its unencumbered deposits with post office/banks.
• A Nidhi Company should have 200 members by the end of first year after its incorporation. The Nidhi Company may need to go into closure if the numbers of members are not increased.

Other Statutory Compliances

Just like any other company Nidhi company has also got certain compliances. The following forms are specified for a Nidhi Company for various compliances-

• Form NDH-1- If a Nidhi company has fulfilled all the minimum requirements, then it should file form NDH-1 within 90 days from end of financial year.
• FormNDH-2- If the minimum requirements are not met than Nidhi Company should file form NDH-2 seeking extension for fulfilment of minimum conditions. If a company is unable to meet minimum requirements at end of second financial year also then it should stop taking deposits and apply for closure.
• Form NDH-3- A company should file its half- yearly return with this form within 30 days of half year end.
• Form NDH-4- The companies need to file this form to get their status updated as per Nidhi Rules-2019. The companies existing before these rules should file it within 1 year of incorporation or 6 months from commencement of rules whichever is later. A new company should file it within 60 days after completing 1 year from its date of incorporation.

Conclusion

As from above discussion, we can conclude that Nidhi Companies offers very easily accessible loans to its members. In this discussion, we saw the overview of how a Nidhi Company is registered and what is the legal framework applicable. The business scene in the city of Jaipur is giving quite good positive vibes to people to come forward and start new businesses. In such scenario, the Nidhi Company is a good method to venture into financial market of Jaipur and become a trusted lender and at the same time be able to provide returns to people on their savings.