The Compliance Structure of NIDHI Companies

The Compliance Structure of NIDHI Companies

What is a NIDHI Company?

As per section 406 of Companies Act, 2013, a NIDHI Company is a non-banking financial business organization. The primary function of a NIDHI Company is lending and borrowing money among its members for their mutual benefit. It is also known as Benefit fund, permanent fund, mutual benefit fund, mutual benefit company, etc.

It fosters a culture of saving among its members. The formation of a NIDHI Company is straightforward and less complex compared to other financial institutions as it does not require obtaining a license from the Reserve Bank of India.

Features of NIDHI Company

The key characteristics of a NIDHI Company include:

Restrictions on NIDHI Company

The restrictions placed on NIDHI Companies are as follows:

Loan Granting Conditions

NIDHI Companies must adhere to certain conditions while granting loans:

Branches

NIDHI Companies can open branches only after consistently earning a net profit after tax for three preceding years and submitting their financial statements and annual returns to the registrar. After this period, branches can be opened in the district.

Limits Against Deposits for Loans

The limits set against deposits for granting loans are as follows:

Returns Required to be Filed

NIDHI Companies are required to file various returns with the ROC:

Annual Filing of Financial Statements and Annual Return

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