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Nidhi Company Registration

Nidhi Company Registration

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How Nidhi Company Is Different From NBFC And Microfinance Company

Start a Nidhi Company is a company wherein you try to start a company with less capital whereas NBFC company needs huge capital investment. The Microfinance Company is the financial institutions that give small-scale financial services in the form of loan, credit, or savings In India. NBFC Companies and Nidhi Companies are running at an expansive and restricted scale respectively. There are certain advantages that one can enjoy by opting for Nidhi Company. But, there are certain restrictions where Nidhi company cannot perform such activities that NBFC can perform which makes Nidhi Companies varying from NBFCs and Microfinance company. NBFC’s extensive roles and privileges to the customer are a plus point which is controlling over Nidhi Companies.

In this topic, we will discuss how Nidhi companies are different from NBFCs and microfinance companies in terms of the things that an NBFC can perform but the Nidhi companies are restricted to do. But before that let’s see their meaning first.

Meaning: Nidhi Company, NBFC, And Microfinance company

We will discuss all three companies in detail:

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Nidhi Company
To start a Nidhi company the company that is incorporated as a Nidhi to cultivate the habit of thrift and savings amongst its members is called Nidhi company. Also, receiving deposits from and lending to, its members only for their mutual advantages and that complies. Though, according to the Indian financial sector, it leads to a mutual benefit society informed by the Central/ Union Government as a Nidhi company. If a company is leading on Nidhi business such as borrowing from members and lending to members only, are known under various names like Nidhi, Permanent Fund, Benefits Funds, Mutual Benefits Funds, and Mutual Benefits Company.

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 Micro-finance company
Micro-finance is also named as microcredit. It is a financial service trading with loans, savings, and insurance to entrepreneurs and individuals who has a small business. Usually, these small business owners do not have access to conventional sources of capital such as banks or investors. A microfinance company aims to give money to the individuals so that he/she can invest in their own company or by themselves. But, the consumers are looking for the small denomination of loans to finance the purchase of a specific material and for the capital to begin a small business.

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NBFC
An NBFC is described as the business of loans and advances or purchase of shares, stocks, debentures, bonds as well as securities whether circulated by the government or local authority but excluding such institutions whose principal business is linked to agricultural activities, industrial activity or purchase or sale of any goods or services. Non-banking financial institutions normally have a principal business of getting deposits under any scheme in one lump sum or installments whether by contribution or by any other method.

Difference between NBFC, Micro Finance, and Nidhi Company

BASIS FOR COMPARISON NBFC Micro Finance Nidhi Company
Meaning An NBFC is a company that provides banking services to people without holding a bank license. The Micro Finance Company is the financial service provider. They provide loans, insurance, saving, and others to the person and business. A Nidhi company is a mutually profitable company, makes a habit of savings by its members as per the Company Act 2013. Only the members can deposit and take a loan from it.
Incorporated under Companies Act 1956 Companies Act 2013  Company Act 2013
Service provided NBFC stands for all those financial institutions that engage in the business of loans/advances, acquisition of shares/stocks/other securities issued by Government or local authority, leasing, hire-purchase, insurance business, chit business. Microfinance Institutions give financial services such as loans, savings, and insurance to poor people of the society and small business contractors who will not be able to qualify for a standard bank loan. Only the members can deposit and take a loan from it. The loans can be applied for personal uses like house repairing, a wedding in the family, etc.
Foreign Investment The government allows 100% FDI in ‘other financial services’ by NBFCs The government allows 100% FDI. No FDI can happen in this Company.
Minium net owner fund Minimum net owned fund Rs 2 crore.  Minimum net owned funds of Rs 5 crore A Net owned fund should be Rs 10 lakh.
Number of Members required At least two persons to start with NBFC At least two persons to start with a Microfinance company A Minimum number of 3 directors and 7 members.

Nidhi Company VS NBFC

All Monetary Business Companies in India are listed as Non-Banking Financial Companies (NBFC) or Banking Companies. Because Nidhi Company is formed, keeping in mind improvement in the culture of saving and lending money, they come under the ambit of NBFC.

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On the other hand, as they cannot take a Deposit from the public, nor lend to the public, so they are not completely NBFCs. And out of the scope of RBI. Though, RBI issues guidelines and directives for them.

 

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NBFC stands for all those financial institutions that involve in the business of loans/advances, acquisition of shares/stocks/other securities allotted by Government or local authority, leasing, hire-purchase, insurance business, chit business.
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Nidhi company vs NBFC, the first one is included only to give or take deposits. And that too, from members/shareholders only. It cannot conduct any business linked to chit fund, hire purchase finance, leasing finance, insurance, or acquisition of securities issued by any body corporate. These businesses are met by the second one, i.e. NBFCs.

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Nidhi Company comes beneath the ambit of the Companies Act, 2013 & 2014, whereas NBFC is incorporated by Companies Act, 1956.

Nidhi Company vs Micro Finance Company

The goal of MFIs, also, is to encourage economic activity among low-income earners. Especially those, who rarely get way to the official banking services.

However, there are variations in the working among a Nidhi Company and MFI, some of which are explained below:

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A Microfinance Company cannot exist without the backing of microfinance institutions.
 

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MFIs maintain many services to local individuals and groups, that are linked to finance, but not only lending and borrowing. MFI can assist people to open a savings bank account. It can also lead educational programs that explain the principles of saving, informed spending, cash management, even accounting or book-keeping. Whereas the sole intention of Nidhi Company Registration is to instill the habit of saving and thrift.
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The number of members or shareholders for Nidhi Company, at its beginning, requires to be at least 7. While the clients for Microfinance company depends on its reach, some are giving over millions of people.

After having a great comparison exposure it’s a bit clear to you how NBFC, Nidhi company, and Microfinance Company are different from each. For your business formation you can pick them as per your needs. For more information on NBFC Registration, Nidhi company registration, and Microfinance company registration you can visit our website.