In the post we have tried to define a Nidhi and Non-Banking Finance Company and how do they differ.

  • A Nidhi Company or Mutual Benefit Society/Fund or any other name by which you may know it is a company created for the mutual benefit of its members. This mutual benefit comes from group lending and borrowing.

  • Within these companies the members make deposits and these deposits are used to give secured loans to the members at a reasonable interest rate. The basic idea of a night company is to save its members from the exploitation of money lenders who charge high interest rates.
  • By becoming members of Nidhi’s people develop the habit of savings and self-reliance.

Nidhi Companies does not belong to NBFC- Nidhi, and NBFC.

Nidhi and NBFC

  • NBFC are basically those companies which engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.
  • A non-banking institution which is a company and has a principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner is also a non-banking financial company.

Visit LegalRaasta, for Nidhi Company Registration.

Nidhi and NBFC Difference: –

A Nidhi company cannot carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate whereas an NBFC engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities, leasing, hire-purchase, insurance business, chit business.

Related Article- Requirements of Nidhi Company

What are Nidhi Companies ? What are NBFC ?
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