Comparison Between Nidhi Company and NBFC Although Nidhi Company is counted to be in the non-banking financial sector in itself it is not a non-banking financial company.
There are many differences between the two, however, there are people who think of Nidhi company as an NBFC, but it’ as a misconception that they have. those who are well informed and are aware of the difference know well that these two are completely different entities. As we know Nidhi company is a type of company that carries out the business of borrowing and lending to its members. NBFC on the other hand apart from indulging in the loans and advances can perform some other businesses as well. NBFC are very much similar to a bank in their operations as it can provide loans to corporate as well as individuals, it has to register itself with RBI. On the other hand, Nidhi companies disburse loan only to its members. There is a huge difference as far as the objective is concerned, Nidhi Company, on one hand, is incorporated to cultivate the habit of saving in its members whereas NBFC is incorporated to address larger issues as it addresses the financial needs of businesses as well as individual and hence plays a larger role in the economy. it is mainly restrictions or limitations that create the difference between the two, for example, Nidhi company cannot buy securities or shares issued by companies nor it can raise funds by issuing preference shares whereas NBFC has no such restrictions. Talking of differences, one major difference is that NBFC requires RBI approval before starting whereas Nidhi Company does not need any such approval although this approval and registration with RBI gives it many powers and increases its credibility. Nidhi Company rely mainly on Nidhi company software or Nidhi CBS software provided by Nidhi software company. So basically, data and information are not secure in Nidhi Company and is in the hands of Nidhi Software Company, whereas NBFC doesn’t work that way and information is much secure in NBFC’S, stays within the company only. Nidhi Company is more of a mutual benefit company rather than a commercial company. well, a list of limitations does not end here there are many more such as Nidhi company
cannot enter into a partnership, nor it can incorporate corporate body as a member, also there are restrictions in terms of opening branches. So, we can say it is the limitations that a Nidhi company has that make it different from regular NBFC.
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