How does Nidhi Company earn money? – ONICK EXPERTS

A Nidhi company is a type of mutual benefit society that operates in India. It is a non-banking financial institution that collects deposits from its members and uses them to provide loans to other members. Nidhi companies are governed by the Nidhi rules 2014, which are regulated by the Ministry of Corporate Affairs. It is a type of Non-Banking Financial Company( NBFC).


The Nidhi Company is a non-banking financial organization that handles the lending and borrowing of funds among its members. It’s crucial for you to comprehend a few key details before creating a Nidhi company.

The investment and borrowing processes are becoming more difficult for small households due to the complexity of the financial markets. The idea of Nidhi Company was developed to help these homes. Nidhi typically refers to a treasure. They are a non-financial company entity with the sole purpose of accepting and lending money to its members.

How does Nidhi Company work and earn money?

  • The source of the word “Nidhi” in Nidhi Company usually means “treasure.” Any mutual benefit society that has been notified by the Central / Union Government is referred to as a Nidhi Company in its more contemporary context in the Indian financial sector. They were established primarily with the intention of encouraging their members to practice frugal living and save money.
  • The businesses that engage in Nidhi, i.e., borrowing from and lending to only members, go by a variety of names, including Nidhi, Permanent Fund, Benefit Funds, Mutual Benefit Funds, and Mutual Benefit Company. Nidhis are extremely localized, single-office institutions that are more common in South India.
  • According to the RBI’s guidelines, a Nidhi company that has been registered under Section 620-A of the Companies Act is currently categorized by the RBI as a “Mutual Benefit Financial Company” and is subject to regulation by the DCA for operational issues and the Bank for fund distribution and deposit-taking activities.
  • Except for those relating to the interest rate on deposits, a prohibition on paying brokerage on deposits, a ban on advertisements, and the requirement of submitting certain returns, these companies are exempt from the core provisions of the RBI Act, including the requirement of registration, the maintenance of liquid assets, and the creation of reserve funds. These businesses can only transact with their shareholders in order to receive deposits and disburse loans.
  • They qualify as mutual benefit societies since only members may transact with them and only individuals may join. The members’ contributions are the main source of funding. Additionally, the group’s members are eligible for loans with comparatively low-interest rates for things like home renovations or repairs. When compared to the established banking industry, the deposits that Nidhis has raised are quite small.
  • A Nidhi company shouldn’t operate in the fields of insurance, leasing finance, hire purchase, chit funds, or hire purchase. It is improper for a Nidhi company to issue debentures or preference shares. Any member of a Nidhi company should not have a current account opened for them. Consequently, the Nidhi company only receives income from its members in the form of deposits.

Loans offered by Nidhi Company:- 

The following limits are set against the deposit made for loan approval:

  • If the deposit is 2 crore, the loan amount is 2 lakh.
  • If the deposit is greater than 2 crores but less than 20 crores, the loan amount is 75 lakh.
  • If the deposit is greater than 20 billion but less than 50 billion, the loan amount is 12 lakh.
  • If the deposit is greater than 50 crore, a loan of 15 lakh will be granted

Leave a Comment

Your email address will not be published. Required fields are marked *