Nidhi Companies are officially recognised as part of India’s non-banking financial industry as of Section 406 of The Companies Act, 2013. Nidhi firms’ primary function is to facilitate member borrowing and lending of funds. The term “mutual benefit company” refers to a type of insurance company that provides benefits to its members.
A lot of people in the southern Indian states work for Nidhi firms. Nidhi Companies are simpler to set up than NBFCs since they don’t have to have a licence from the Reserve Bank of India.
Initially, a public limited company with “Nidhi Limited” in the name should be incorporated. A separate application is submitted with the ROC for Nidhi Company Status whenever the number of shareholders reaches 200 within a year of the company’s creation. The Company should restrict its borrowing and advance activities to and from its members alone and shall not solicit the general public for deposits.
