Is It Possible To Get a Loan Under Nidhi Scheme?

In today’s era, Nidhi Company has come out as a popular source for lending funds. Further, this business structure is most predominant in the Southern Region of India. The main reason behind its introduction was to help its member during the time of financial crunch and to inculcate the habit of savings among them. In this blog, we will discuss the concept of “Loan under Nidhi Scheme”.

Concept of Nidhi Company

The term “Nidhi Company” refers to a kind of NBFC (Non-Banking Financial Corporation) that is regulated by the provision of the Companies Act 2013.

Further, the feature that differentiates it from other business formats is that it works only for the mutual benefit of its member.

Also, it shall be considerate to state that the activities of this business format do not fall under the realm of RBI.

Moreover, for a Nidhi Company registration, the main source of funding is the deposits received from its members and shareholders. Also, the members can obtain a loan under Nidhi Scheme at a comparatively reasonable rate.

Regulatory Framework for Nidhi Company

The regulatory framework for a Nidhi Company are as follows:

1. Companies Act 2013^[1]
2. Nidhi Rules 2014

Concept of Loan under Nidhi Scheme

A Nidhi Company is eligible to accept deposits and provide loans to its shareholders or members. Further, there are various provisions that deal with the concept of Loan under Nidhi Scheme. Also, the rate at which such loans are provided must be based on the guidelines and directions issued by the Apex Bank or RBI.

Things to Consider while Providing Loan under Nidhi Scheme

The points to consider while granting Loan under Nidhi Scheme are as follows:

1. A Nidhi Company needs to obtain prior approval from the MCA (Ministry of Corporate Affairs) or DoC (Department of Commerce) of either State or Central Government for giving out loans;
2. Nidhi Company must provide the loan within the limit specified;
3. In case the Total Deposits of a Nidhi Company is below the threshold of Rs 2 crores, then, in that case, it can grant loan only up to Rs 2 lakhs;
4. A Nidhi Company is eligible to advance loan only up to Rs 15 lakhs if in case the total deposits received is more than Rs 50 crores;
5. The only aim behind the incorporation of a Nidhi Company is to work for the mutual benefits of its members and shareholders;
6. A Nidhi Company is not eligible to provide loans to any corporate body;
7. A Nidhi Company is not allowed to provide loans against securities;
8. Nidhi Companies are not eligible to lend any unsecured loan;

Summarised Ceiling Limits of Loan under Nidhi Scheme

Amount of Deposits Received	Permissible Loan Limit
If the total amount of deposits received is less than Rs 2 Crores.	Rs 2 Lakhs
If the total amount of depositsreceived is above Rs 2 croresbut less than Rs 20 Crores.	Rs 7.50 Lakhs
If the total amount of deposits received is above Rs 20 crores but less than Rs 50 Crores.	Rs 12 Lakhs
If the total amount of deposits received is Rs 50 crores or more	Rs 15 Lakhs

Concept of Loan Against Securities under Nidhi Scheme

A Nidhi Company is not eligible to grant loans against securities to its member under Nidhi Scheme.

However, a Nidhi Company can grant loans against securities in the following situations:

Security No 1: Gold and Silver Jewellery

This type of loan is very much popular among common people and is known as the Gold Loan. However, it shall be considerate to note that the loan value must not be more than 80% of the total value of securities. Also, the same should not be given for more than one year.

Security No 2: Immovable Property

This type of loan is provided against immovable property. Further, the loan value of this type of loan must not exceed 50% of the overall value of securities. Also, the same should not be given for more than seven years.

Security No 3: Receipts of Fixed Deposits, Government Securities, National Saving Certificates and Insurance Policies

This type of particular loan is not very common among the general public. However, it shall be considerate to mention that, in the case of loans against fixed deposits, the loan tenure must not cross the unexpired period of the FD (Fixed Deposits).

Other Relevant Provisions under Nidhi Scheme

Some of the other relevant provisions under Nidhi Scheme are as follows:

1. Whenever a credit or loan is granted to a Subsidiary Company from a Financial Institution, then, in that case, security or guarantee for loan is given by the company;
2. In case a Nidhi Company is earning profits for the last 3 financial years, then, in that case, the members cannot acquire a loan above 15%;
3. The members who have defaulted in the repayment of loans are not eligible to take a new loan from the company;
4. It shall be considerate to note that only the members or their representatives are eligible to apply for a loan from a Nidhi Company;

Types of Loans not Allowed Under Nidhi Scheme

The different types of loans that are not allowed to be given under Nidhi Scheme are as follows:

Personal Loans

A Nidhi Company is not eligible to lend or grant money as a personal loan based on credibility and Income Tax Return (ITR). The reason behind the same is that a loan can be granted only against any security, such as immovable property or gold.

Micro Finance or Small Credit

A Nidhi Company is not allowed to provide loans and work as a Microfinance Company, especially in semi-urban and rural areas.

Vehicle Finance

A Nidhi Company is not allowed to provide vehicle loans, as the same is allowed only by a registered NBFC (Non-Banking Financial Corporation). 

Hire Purchase Finance

The business dealing in Hire Purchase is not eligible to take a loan under Nidhi Scheme.

Conclusion

In a nutshell, a Nidhi Company is governed by the provisions of the Companies Act 2013 and Nidhi Rules 2014, and the same is eligible to accept deposits and provide loans to its shareholders or members as well.

Further, a Nidhi Company needs to obtain prior approval from the MCA or DoC either State or Central Government for giving out loans. Also, it can provide loan against securities, such as gold, silver, and immovable property, but, same is not the case with Personal Loan, Vehicle Loan, Hire Purchase Finance, etc. Lastly, in case of any other dilemma and perplexity regarding loan under Nidhi Scheme, reach out to Swarit Advisors, out experts will not only solve out all your issues and but will assist in the process of Nidhi Company Registration as well.