1. COMPANIES ACT, 2013 SECTION 406 AND NIDHI RULES, 2014
NIDHI COMPANY
COMPANIES ACT, 2013
SECTION 406 AND NIDHI RULES, 2014

2. INCORPORATION OF NIDHI COMPANY
IT SHALL BE A PUBLIC LIMITED AND SHALL HAVE MINIMUM PAID UP SHARE CAPITAL OF RS. 5,00,000/-
A NIDHI CAN BE INCORPORATED VIA FORM INC-29 (INTEGRATED INCORPORATION FORM)
OBJECTS OF THE NIDHI SHALL BE AS “CULTIVATING THE HABIT OF THRIFT AND SAVINGS AMONGST ITS MEMBERS, RECEIVING DEPOSITS FROM, AND LENDING TO, ITS MEMBERS ONLY, FOR THEIR MUTUAL BENEFIT.”
IT SHALL HAVE THE LAST WORD “NIDHI LIMITED” AS PART OF ITS NAME.
ONLY INDIVIDUAL CAN BE A MEMBER OF A NIDHI COMPANY. A BODY CORPORATE OR TRUST CAN NOT BECOME THE MEMBER OF NIDHI. HENCE IT CAN NOT TAKE DEPOSITS FROM OR LEND MONEY TO ANY BODY CORPORATE.
A MINOR CANNOT BECOME A MEMBER OF NIDHI COMPANY. HOWEVER, IF A GUARDIAN OF ANY MINOR IS A MEMBER OF SUCH NIDHI, THEN IT CAN ACCEPT DEPOSITS IN THE NAME OF MINOR.

3. Mandatory Statutory Requirements For Nidhi Company
It must have minimum 200 members.
It must have Net owned funds of at least 10 lacks (Net owned funds: Paid up Capital + Free Reserves – Accumulated Losses – Intangible Assets)
The ratio of net owned funds to deposits shall be 1:20
Every Nidhi company shall invest and continue to keep invested in Unencumbered Term Deposits with a Schedule Commercial Bank, Post Office deposits in its own name, an amount which shall not be less than 10% of the Deposits outstanding at the close of business on the last working day of the preceding 2 months.

4. ACCEPTANCE OF DEPOSITS BY NIDHI
LIMIT OF DEPOSIT: A NIDHI COMPANY SHALL NOT ACCEPT DEPOSITS EXCEEDING 20 TIMES OF ITS NET OWNED FUNDS AS PER ITS LAST AUDITED BALANCE SHEET. (NET OWNED FUND MEANS PAID UP EQUITY SHARE CAPITAL + FREE RESERVES - ACCUMULATED LOSSES AND INTANGIBLE ASSETS APPEARING IN THE LAST AUDITED BALANCE SHEET.)
TERM OF DEPOSIT:
FD : 6 MONTHS TO 60 MONTHS.
RD : 12 MONTHS TO 60 MONTHS.
MAXIMUM BALANCE IN SAVING DEPOSIT ACCOUNT: RS /-
MAXIMUM RATE OF INTEREST FOR SAVING DEPOSIT ACCOUNTS: 2% ABOVE THE RATE OF INTEREST PAYABLE ON SAVING BANK ACCOUNT BY NATIONALIZED BANKS.
MAXIMUM RATE OF INTEREST FOR FD OR RD ACCOUNTS: AS PRESCRIBED BY RBI FOR NBFCs ACCEPTING PUBLIC DEPOSITS.

5. MEMBERSHIP OF NIDHI AND ALLOTMENT OF SHARES TO THE MEMBERS
ONLY AN INDIVIDUAL CAN BE A MEMBER OF NIDHI COMPANY. A BODY CORPORATE OR TRUST CAN NOT BECOME A MEMBER OF NIDHI COMPANY.
A MINOR CAN NOT BECOME A MEMBER OF NIDHI COMPANY. HOWEVER DEPOSITS MAY BE ACCEPTED IN THE NAME OF MINOR,IF THEY ARE MADE BY A NATURAL OR LEGAL GUARDIAN OF SUCH MINOR AND ALSO A MEMBER OF SUCH NIDHI COMPANY.
MINIMUM NUMBER OF MEMBERS AT ANY POINT OF TIME: 200
NIDHI COMPANY CAN NOT OPEN ANY CURRENT ACCOUNT WITH ITS MEMBERS.
MINIMUM NOMINAL VALUE OF SHARE: RS. 10
MINIMUM NUMBER OF EQUITY SHARES ALLOTEMENT TO MEMBERS:
- TO FD HOLDER: 10 SHARES OF RS. 10 OR SHARES EQUIVALENT TO RS. 100
- TO SAVING ACCOUNT HOLDERS AND RD HOLDERS: 1 EQUITY SHARE OF RS. 10.

6. LOANS TO MEMBERS LIMITS OF LOAN GIVEN BY A NIDHI TO ITS MEMBERS:
EXPLANATION: WHERE A NIDHI HAS NOT MADE PROFITS CONTINUOUSLY IN THE 3 PRECEDING FINANCIAL YEARS., IT SHALL NOT MAKE ANY FRESH LOAN EXCEEDING 50% OF THE ABOVE SPECIFIED LIMITS.
THE AMOUNT OF DEPOSIT ACCEPTED BY NIDHI SHALL BE CALCULATED ON THE BASIS OF LAST AUDITED BALANCE SHEET
THE RATE OF INTEREST TO BE CHARGED ON ANY LOAN GIVEN BY THE NIDHI SHALL NOT EXCEED 7.5% ABOVE THE HIGHEST RATE OF INTEREST OFFERED ON DEPOSITS BY SUCH NIDHI.
AMOUNT OF DEPOSIT ACCEPTED BY NIDHI
MAXIMUM AMOUNT OF LOAN TO A MEMBER
LESS THAN 2 CRORES
RS LACS
MORE THAN 2 CRORES BUT LESS THAN 20 CRORES
RS LACS
MORE THAN 20 CRORES BUT LESS THAN 50 CRORES
RS LACS
MORE THAN 50 CRORES
RS LACS

7. REPAYMENT TIME OF LOAN AND SECURITY THEREON
A NIDHI SHALL GIVE LOANS TO ITS MEMBERS ONLY AGAINST THE FOLLOWING SECURITIES:
- GOLD, SILVER AND JEWELLERY (REPAYMENT PERIOD OF SUCH LOAN SHALL NOT EXCEED 1 YEAR)
- IMMOVABLE PROPERTY (REPAYMENT PERIOD OF SUCH LOAN SHALL NOT EXCEED 7 YEARS)
- FD RECEIPTS, NSC, GOV. SEC. AND INSURANCE POLICIES (REPAYMENT PERIOD OF SUCH LOAN SHALL NOT EXCEED 1 YEARS)
EXPLANATIONS:
1. IN CASE OF IMMOVABLE PROPERTY:
- LOAN AGAINST IMMOVABLE PROPERTY SHALL NOT EXCEED 50% OF THE OVERALL LOAN OUTSTANDING ON THE DATE OF APPROVAL BY BOARD.
- LOAN SHALL NOT BE SANCTIONED EXCEEDING 50% OF THE VALUE OF PROPERTY PROPOSED TO BE SECURED.
2. IN CASE OF LOAN AGAINST FD:
THE PERIOD OF LOAN SHALL NOT EXCEED THE UNEXPIRED PERIOD OF FD.

8. RESTRICTIONS ON NIDHI COMPANY
NIDHI COMPANY CAN NOT CARRY OUT THE BUSINESS OF CHIT FUND, HIRE PURCHASE FINANCE, LEASING FINANCE, INSURANCE OR ACQUISITION OF SECURITIES ISSUED BY ANY BODY CORPORATE.
NIDHI COMPANY CAN NOT ISSUE PREFERENCE SHARES, DEBENTURES OR ANY OTHER DEBT INSTRUMENT.
NIDHI COMPANY CAN NOT OPEN ANY CURRENT ACCOUNT WITH ITS MEMBERS.
NIDHI COMPANY CAN NOT ACQUIRE ANOTHER COMPANY (VIA CONTROLLING THE VOTING RIGHTS OR COMPOSITION OF MANAGEMENT)
NIDHI COMPANY CAN NOT CARRY OUT ANY OTHER BUSINESS EXCEPT THE BUSINESS OF BORROWING AND LENDING MONEY TO ITS MEMBERS ONLY.
NIDHI COMPANY CAN NOT PLEDGE ANY OF THE ASSETS LODGED BY ITS MEMBERS AS SECURITY.
NIDHI COMPANY SHALL NOT ENTER INTO ANY PARTNERSHIP AGREEMENT/ARRANGEMENT IN ITS BORROWING OR LENDING ACTIVITIES.
NIDHI COMPANY SHALL NOT ISSUE OR CAUSE TO BE ISSUED ANY ADVERTISEMENT IN ANY FORM FOR SOLICITING DEPOSIT.
NIDHI COMPANY SHALL NOT PAY ANY BROKERAGE OR INCENTIVE FOR MOBILISING DEPOSITS FROM MEMBERS OR FOR GRANTING LOANS.
NIDHI COMPANY SHALL MAINTAIN NET OWNED FUNDS OF RS. 10,00,000/- (NET OWNED FUND MEANS PAID UP EQUITY SHARE CAPITAL+FREE RESERVES-ACCUMULATED LOSSES AND INTENGIBLE ASSETS APPEARING IN THE LAST AUDITED B.S.

9. FORM NDH-1 (RETURN OF STATUTORY COMPLIANCE)
EVERY NIDHI COMPANY SHALL WITHIN A PERIOD OF 90 DAYS FROM THE DATE OF CLOSING OF ITS FIRST FINANACIAL YEAR , FILE FORM NDH-1 WITH ROC. AND ENSURE THAT:
- IT SHALL HAVE MINIMUM NUMBER OF 200 MEMBERS.
- NET OWNED FUNDS OF RS. 10,00,000/- OR MORE.
- RATIO OF NET OWNED FUNDS TO DEPOSITS OF NOT MORE THAN 1:20.
- IT SHALL INVEST AND CONTINUE TO KEEP INVESTED, IN UNENCUMBERED TERM DEPOSITS WITH A SCHEDULED COMM. BANK OR POST OFFICE DEPOSITS IN ITS OWN NAME AN AMOUNT WHICH SHALL NOT BE LESS THAN 10% OF THE DEPOSIT OUTSTANDING AT THE CLOSE OF BUSINESS ON THE LAST WORKING DAY OF THE SECOND PRECEDING MONTH.
IF A NIDHI FAILS TO COMPLY WITH THE ABOVE REQUIREMENTS THEN IT SHALL WITHIN A PERIOD OF 30 DAYS FROM THE DATE OF CLOSING OF ITS FIRST FINANCIAL YEAR, FILE FORM NDH-2 WITH RD FOR EXTENTION OF TIME.

10. NDH – 3 (HALF YEARLY RETURN) AND CERTIFICATION
EVERY NIDHI SHALL WITHIN A PERIOD OF 30 DAYS FROM THE DATE OF CONCLUSION OF HALF YEAR, FILE FORM NDH – 3 WITH RESPECTIVE ROC DULY CERTIFIED BY PCS/PCA/PCWA.
THE AUDITOR OF THE COMPANY SHALL FURNISH A CERTIFICATE EVERY YEAR TO THE EFFECT THAT THE NIDHI COMPANY HAS COMPLIED/NOT COMPLIED WITH ALL/ANY PROVISION(s) OF THE ACT AND RULES AND SUCH CERTIFICATE SHALL BE ANNEXED TO THE AUDIT REPORT.

11. DIRECTORSHIP OF NIDHI COMPANY
THERE MUST BE 3 DIRECTORS ON THE BOARD.
THE DIRECTOR SHALL BE A MEMBER OF THE NIDHI COMPANY.
THE DIRECTOR CAN BE APPOINTED FOR A MAXIMUM PERIOD OF 10 CONSECUTIVE YEARS.
THE DIRECTOR SHALL BE ELIGIBLE FOR REAPPOINTMENT ONLY AFTER EXPIRATION OF TWO YEARS OF CEASING TO BE A DIRECTOR.
THE DIRECTOR SHALL HAVE A VALID DIN AND SHALL NOT BE DISQUALIFIED IN THE TERMS OF SECTION 164.

12. AUDITORSHIP OF NIDHI COMPANY
INDIVIDUAL AUDITOR: 1 TERM OF 5 CONSECUTIVE YEARS
AUDIT FIRM: 2 TERMS OF 5 CONSECUTIVE YEARS
SHALL BE ELIGIBLE FOR REAPPOINTMENT (SUBSEQUENT APPOINTMENT) AFTER THE EXPIRY OF 2 YEARS FROM THE DATE OF COMPLETION OF HIS/ITS TERM.