Nidhi Company- National Initiative For Developing And Harnessing Innovations

The NIDHI Company recently came to news when in last month the Ministry of Corporate Affairs issued an regulatory advisory directing some does and don'ts for the non-banking finance entities.

What is a NIDHI Company ? 

NIDHI Company is a Non-Banking Financial Company which serves as a guide for the small investors of India. It is legally recognized under Section 403 of the Companies Act,2013 and is regulated by the Reserve Bank of India. The framework of this program covers small investors, potential businessmen and experts of the financial field.

The composition of a NIDHI Company has to such that it should have at least seven members (shareholders) at its core committee. It must be a Public Limited Company under the Companies Act. Such Company should have Rs.5 Lakh equity capital. These are some general composition criteria of a NIDHI Company.

Functions of a NIDHI Company 

A NIDHI Company envisages multiple functions. The primary is to create an environment of saving and financial stability of its members. The main purpose of it is lending and borrowing of money between the members for their mutual benefit. The program wants to create an enclosed financial setup for small investors and businessmen in the country.  It promotes effective utiization of funds and savings among its members.

REGISTRATION AS A NIDHI COMPANY 

Registration of a company as a NIDHI Company is subjected to less complications and anyone can register. The legal framework is such created so as to refrain the investors from indulging into the net of formalities. Infact, one can register through online website by filling the simple form and details required therein. The procedure of registration is not a complex one, all what is required is to follow few steps. These steps are –

• Application of Digital Signature & DPIN 
• Filing for Approval of the name of the Company
• After approval of name, MOA (Memorandum of Approval) and AOA (Articles of Associate) are filed with the Ministry of Corporate Affairs
• Incorporation Certificate 
• Application for PAN, Bank account.

ADVANTAGES OF REGISTERING 

Putting one’s Company under the legal framework has several benefits. This NIDHI Company program has several advantages. Let us look into some of them-

• It has legal complications thus making the management less troublesome.
• It focuses on creating a habit of funds utilization among its members.
• More credibility and less level of risk.
• It relies on mutual benefit which gives every meter the opportunity of lending and borrowing money.
• Investment and Savings are prime objectives of the program which progresses the financial atmosphere of the country.

CONCLUSION 

The NIDHI Company program is a step taken towards the small investors and businessmen of the country so as to ensure that they are taken care of and given importance in the economy of the country. However, this program has its own drawbacks and limitations which can be hoped to be corrected by the government to enhance the benefits it aims to provide.