You can start Lending by incorporating a Nidhi Company


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Are you passionate about finance?

Want to start something that could help people getting financial assistance?

Hold on, I am not talking about Banks or NBFCs.

I am going to tell you something more interesting and easy to start up with if you are passionate about financing, helping people of getting funds. Nidhi Company is such an institution which is perfect for you. You don’t require to open up a bank or NBFC to accept deposit and giving a loan. It is much easier to incorporate and operate.

‘Nidhi’ generally means wealth or treasure but in terms of finance, it is basically ‘principle of mutuality’. A Nidhi company belongs to the Non-Banking Financial Company sector but it is different from the NBFCs. Nidhi companies are recognised under section 406 of the Companies Act 2013.

The function of these companies is to accept deposits and lend funds to its members only and are also known as Permanent Fund, Benefit Fund, Mutual Benefit Fund, Mutual Benefit Company. They are incorporated as Public Limited Company and governed by Nidhi Rules 2014 and Indian Companies Act 2013. They have to incorporate with ‘Nidhi Ltd’ written at the last of its name.

Key points of Nidhi companies:

  • Do not require the approval of RBI for registering.
  • It can only operate within its members, ie, it can only accept deposits from its members and provide loans to its members only.
  • Need to have ‘Nidhi Limited’ as a part of its name.
  • Easier to incorporate than NBFCs which need approval from RBI to start its operations.
  • Lesser documentation is needed.
  • No external involvement.
  • Interest Rate is low.
  • Should have at least 200 members.
  • Limited Liability.

Necessities of registration as Nidhi company:

  • Minimum 3 directors
  • Minimum 7 shareholders
  • Should have a paid-up share capital of 5 lakh.
  • DIN of directors.
  • ‘Nidhi Ltd’ as a part of their name.
  • Pan Card
  • Photo Id Proofs
  • Passport Size photographs of directors.
  • Electricity bill, Water bill
  • Rent agreement (if property is rented)
  • Property Papers (if owned property)

I provided you with a possible necessity for registration, you may need some other depending upon from where you are getting registered.

Most of these companies are incorporated in South India. The sole objective of these companies is to help its members in getting funds easily and safeguard them from money lenders’ huge rate of interest.

So, if you are keen to open your own, I think you are now aware of the basics. Find a unique name (with ‘Nidhi Ltd’ to its end) get registered and start your own company. Help your members and form a by the member, of the member, for the member company.

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