3/15/22, 1:16 PM
MERITS AND DEMERITS OF NIDHI COMPANY: keemojohn1 — LiveJournal
keemojohn1 March 15 2022, 13:15
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MERITS AND DEMERITS OF NIDHI COMPANY
Nidhi company is a company that comes under NBFC, but it is different from other NBFC companies as it does not require registering itself with RBI. RBI has exempted it from complying with norms that it has set for other NBFFCs. Nidhi Company is a company that indulges in the business of accepting deposits and lending loans from its members. Registered under section 406 of companies act of 2013. Its main objective is to develop the habit of savings among its members. it can be started with the capital of five lakhs and need to make at least 200 members within one year of its commencement. Nidhi companies have certain advantages and disadvantages, which we are going to discuss here.
ADVANTAGES: Well first and foremost advantage of Nidhi companies is that it provides financial services to middle and lower-middle classes with a minimum of paperwork. Not only does it provide financial services to them but it helps in cultivating the habit of savings in them. Many times, people of the lower middle class due to low annual income fail to meet the minimum eligibility criteria for a loan. Nidhi companies help this lower middle class in getting loans for their requirement and hence fulfil their dreams. Another advantage is the ease of formation of Nidhi companies as very minimum paperwork is required. As compared to other NBFCS its registration is fairly simple. Also, one major advantage of Nidhi companies is that risk of non-payment of loans is fairly low in Nidhi companies as it accepts deposits and disburses loans to its members only. Talking of advantages one which it has is very minimum capital is required for setting up Nidhi company. Since Nidhi company deals with its members only there is no outside interference. another advantage of Nidhi company is that operations at Nidhi companies are usually run-on Nidhi company software which is online software. Nidhi software for the cloud makes working pretty smooth. Also, Nidhi software for the cloud makes it accessible from any place in the world. so, with Nidhi Software for the cloud makes every member of the company keep track of the working of the company. These were a few advantages of Nidhi companies, now let's discuss some of its disadvantages. DISADVANTAGES: firstly the biggest disadvantage that it has is the limitation in terms of funds that it can raise as it accepts deposits from its members only. Also, they are restricted https://keemojohn1.livejournal.com/602.html
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3/15/22, 1:16 PM
MERITS AND DEMERITS OF NIDHI COMPANY: keemojohn1 — LiveJournal
in terms of advertising their deposit schemes, also they cannot indulge in any other business than borrowing and lending. one more disadvantage of Nidhi company is that it can have a term deposit of more than five years. CONCLUSIONS As we can see Nidhi company has advantages and disadvantages. but obviously, it solves a few problems of middle and lower-middle-class people. Advantages somehow overshadow the disadvantages of Nidhi company. So, the government needs to promote the incorporation of Nidhi company mainly to solve problems that the middle and lower-middle-class face when it comes to financial services.
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