Is Nidhi Finance Company Profitable to Start in India?

A Nidhi company is a particular type of business that falls under the non-banking finance category. The Nidhi Finance Company is recognised under Section 406 of the Companies Act 2013 in India and governed by the Nidhi Rules 2014. The major goal of this kind of business or firm is to make it easier for the basic Nidhi members to lend money to one another. 

The Nidhi Company provides a range of investment options, such as venture capital, mutual funds, and individual securities. You must first get the necessary approval from the Indian Government in order to launch a Nidhi Company in India. Additionally, you will need to submit your business plan and register with the appropriate regulatory body. It’s time to start selling your goods and services after you have completed the necessary registrations and liscences.  

How Can Starting Nidhi Finance Company Be Profitable in India?

You can take a number of benefits by registering as a Nidhi finance company. These are:

1. Easy to form
 

• It just needs seven persons, three of whom should be selected as directors.
• Need a few fundamental documents.
• Online registration is very simple and easy to complete.
• Only ten to fifteen days are required to finish the registration process. 
• When compared to the other categories of finance companies like NBFC, the Nidhi Company registration process is quite a straightforward process. The registration of Nidhi company is really simple.   

2. Registration is cost-effective
 

A Nidhi company can be registered for the lowest and most affordable amount. To start a Nidhi finance company, you need to invest a minimum capital of Rs. 5,00,000 to Rs.10,00,000. After the registration process, you have two months to prepare and invest the funds. 

3. Less RBI Rules and Regulation 
 

Since Nidhi Company is a non-financially organisation, its operation falls under the NBFC category; nonetheless, the RBI’s permission is not required. These businesses adhere to the Nidhi Rules, 2014, which were published in relation to the operations and activities of the business; Nidhi company has been exempted by the RBI; therefore, there is no need to adhere to strict compliances, and you do not need to present all your documentation in a hurry.     

4. Low risk 
 

The Nidhi Rules, 2014 make it very obvious that a Nidhi Company may only accept deposits from and lend money to its shareholders or members, reducing the chance of loan default compared to other finance companies. The Nidhi company is the most reliable option for loan lending, and the loans are given at lower rates as compared to those provided by other finance companies, allowing its members to save more money.   

5. More certainty
 

Basically, from six years old to sixty-year-old individuals, everyone enjoys and wants to save their money. Nidhi company is one of the greatest strategies to save your money in a decent way. The major goal of this Nidhi Company is to encourage members to develop the habit of saving money, which over time, will result in members continuing to do so. 

6. Uninterrupted operations 
 

The Company is able to guarantee continued operational existence even at the time when any member passes away or leaves the company. Regardless of any necessary changes to any membership, the company will continue to exist.  

7. Net-owned fund 
 

The capital invested by the company owner to raise money is known as the net-owned fund. Accordingly, a net owned fund ratio of a Nidhi company is approximately 1:20, meaning that if a person invests one rupee, they can raise a deposit of twenty rupees.     

Documents Needed for Nidhi Company Registration in India
 

To register as a Nidhi finance company, you need to submit the following documents, such as:

• Passport-size photograph of directors
• Self-Attested Copy of Pan Card of Directors
• Electricity/Water Bill (Proposed register office)
• Copy of Voter Id card /Aadhaar card that is self-attested
• Email Id & Mobile No of all Designated Partners
• Copy of Property Papers (If owned Property)
• Copy of rent Agreement (If rented Property)
• NOC from the landlord of the area where the company is registered.

Criteria for Obtaining the Status of Nidhi Company 
 

The following conditions must be met by the Nidhi Company within one year of registration as a Nidhi company.

• It requires at least 200 or more members.
• Its minimum net owned funds amount must be Rs. 10,00,000.
• Unencumbered term deposits should make up 10% or more of the total amount of deposits.
• The net owned funds ratio to deposits should not exceed 1:20.  

If the company fulfils the aforementioned conditions, it must file form NDH-1 within 90 days of incorporation, together with the necessary fees. A correctly certified form must be signed by a licenced CA, CS, or CWA.  

A second financial year may be sought by submitting NDH-2 to the Regional Director within 30 days of the conclusion of the first financial year. 

What Are the Requirements to Start a Nidhi Company in India?
 

To start a Nidhi finance company, a few minimal prerequisites must be met. These comprise the required share capital, net owned funds, number of members, number of shareholders, etc. 

• The business must be registered as a public limited company under the Companies Act.
• Stockholders: There must be at least seven shareholders.
• Number of Directors – The company must have three or more directors.
• Equity Share Capital—At least 5 lakh rupees in equity share capital is needed.
• The company needs to employ at least 200 individuals.
• At least 10 lakh rupees in net owned funds.
• The name of the business should end with "Nidhi Limited."
• Lending and borrowing money must only be made among those who have signed up as members.
• Unencumbered term deposits should make up 10% or more of the corporation's total outstanding deposits.
• The Net Owned Funds ratio to Deposits for the company must be under 1:20.

How to Start Nidhi Finance Company Successfully?
 

By considering the following things mentioned below, you can successfully start and operate Nidhi company.

Profit sharing 
 

Profit sharing is one of the most crucial considerations before establishing a Nidhi company in India. This is a significant aspect of Indian culture; thus, it’s critical that the owners of your Nidhi business are dedicated to dispersing their income among their staff. 

Taxation is another consideration before establishing a Nidhi company in India. Depending on their size and type, businesses in India are taxed at various rates. Before you start your business, make sure you are familiar with all the tax laws and rules governing Nidhi.

Stock options 
 

Make sure you have enough stock options available before starting a Nidhi finance company in India. This is one of the most necessary factors to consider. This will enable you to benefit from the company’s success and receive a portion of its earnings.    

It’s crucial to confirm that your business has a strong legal foundation. A sound legal framework will safeguard your assets and guarantee that you may conduct business as usual without being hindered. 

Board of directors 
 

It is necessary to have a board of directors before starting a Nidhi finance company in India. Experienced persons who lead and manage the business should make up this board. The CEO should be able to be hired and fired by the board, and the board should have the authority to decide on financial and operational issues.    

The company's registration with the relevant government body is a crucial consideration when launching a Nidhi company in India. By doing so, you can abide by local laws and stay out of trouble with the law. Last but not least, you should register your trademarks and copyrights to protect your intellectual property.

Temporary incorporation certificate 
 

It is crucial to understand the procedure for registering a company with the appropriate government agencies before starting a Nidhi company in India. A temporary certificate of incorporation can be obtained to do this. This document will serve as evidence that your business has been established and that you are in good standing with the law.  

You must submit copies of the documentation listed below to the appropriate government agencies once you have received the certificate of incorporation. These consist of:

• A copy of the temporary certificate of incorporation
• A copy of business registration (if applicable)
• Articles of association's copy (if relevant)
• A memorandum and articles of association (if relevant)
• A declaration from your business secretary attesting that all necessary paperwork has been submitted
• You will obtain a Company registration number from the government once all necessary paperwork has been filed. When filing your income tax return and other official documents, you will require this number.

Conclusion 

The Nidhi Finance Company is popular nowadays in the Indian financial scene. Given the benefits of establishing a Nidhi Company, it should come as no surprise that more and more people are choosing the "Nidhi Route" to launch their financial ventures in India. If you wish to register your Nidhi company in India, feel free to contact the experts of Online Legal India for hassle-free registration.