Segment 406 of Companies Act 2013 and Companies (Nidhi Companies) Rules, 2014 represent Nidhi companies. A Nidhi company has been integrated with the following objectives:
Nidhi means ‘treasure’. In the financial sector, however, it means any mutually beneficial society that has been notified by the center, which tries to cultivate the habit of savings among its members.
Nidhi company is a class of NBFCs and RBI is empowered to issue bearings to them in issues identifying with their deposit acknowledgment activities. However, in acknowledgment of the way that these Nidhis manage with their financial specialist only, RBI has exempted the notified Nidhis from the core provisions of the RBI Act and other directions applicable to NBFCs. Subsequently, Nidhi Company is an ideal entity to take a deposit from and lend to a specific group of people.
The companies doing Nidhi business are known under different names like Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company. This type of a company is popular in the southern part of the country and is considered to be localized single office institutions. They are mutual benefit societies as their dealings are restricted to its members and the membership is limited. The source of funds for such a society is the contribution from its members. LOANs thus given out are at reasonable rates and most of the LOANs are for construction of house, or repairs. LOANs are generally secured.