Where does a Nidhi company invest its money?

[swaritadvisors]

Nidhi Company is a business structure designed under the Company Act, 2013 under the section 20A. It is regulated by the Ministry of Corporate Affairs (MCA) and gets its funding from the contribution from its members. Its main objective is to develop the habit of savings amongst it member so that they can use it for their mutual benefits.

What are the benefits provided by Nidhi Company to its members?

Nidhi Company in India is quite distinctive from other companies in India. In order to provide benefits to the members of Nidhi Company, it is providing loans, to its members at relatively reasonable rates from outside for the basic purpose of construction and repair of their accommodation. Moreover, the Nidhi Companies help their members in saving their money that can be used in future for their own mutual benefits.

Before getting a Nidhi company registration, here are some facts you need to know about it:

To have a Nidhi company license it is mandatory to have at least 200 members, within a time period of one year of incorporation.

The main objective of Nidhi Company is to cultivate the habit of saving and thrift between their members by receiving deposits from their members and lending it back at the times of need.

It is incorporated as a public limited company.

The Net owned fund of a Nidhi company in India must be 10 lacs or more within a time period of one year. The ratio of net owned fund to deposit should not exceed than 1:20.

Where do Nidhi companies invest their money?

The money received by Nidhi Company in the form of deposits is privately circulated amongst the members in the form of investment and loan schemes. Since a Nidhi company is not governed by any kind of trust and committees, there isn’t any kind of external involvement in its working.

Different limits are prescribed against the deposit made to grant a loan through Nidhi Company.

To grant a loan amount of 2 lacs the deposit value should be of 2 crores.

To grant a loan amount of 7.5 lacs deposit value should be more than 2 crores but less than 20 crores

To grant a loan amount of 12 lacs the deposit must be of more than 20 crore but less than 50 crores.

Top grant a loan amount of 15 lacs the deposit amount should be more than 50 crore.

Final Words

To invest more money and to increase the scale of mutual benefits, members can open more branches of the Nidhi Company in India. Once a Nidhi company is able to earn a net profit even after the proper taxation of preceding three years, they can open up to 3 more branches in their district. Other than that they need to submit the annual returns and financial statement to the registrar, before opening the new branches of Nidhi Company. To obtain Nidhi company registration or have any kind of doubts regarding Nidhi company feel free to contact Swarit advisors.

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