NBFC and Nidhi Companies are seen to be functioning at larger and smaller platforms respectively. In this blog we will discuss what Nidhi company do not have privilege to perform but NBFCs have.
Below are the privileges of NBFCs over Nidhi Companies-
Minimum capital of Rs. 5 Lakh is required for starting of the business in Nidhi Companies. Where NBFCs are governed by RBI and minimum 2 crore net worth is required in order to start the finance business.
- Nidhi Company cannot do any other Business- If you have a Nidhi company you carry out the business of chit funds, hire purchase finance, lease finance etc. therefore, Nidhi companies carries a predefined business and is not allowed to pursue the business of any other type. And in order to do business of chit funds and other separate business, then separate License is required to take for pursuing such business.
- Cannot open a Branch before three years- For opening a Nidhi Company in india, then the company must earn profits continuously for 3 years and after that only they are allowed to open a Branch. It is one of the mandatory condition and it cannot be compromised even if you have sought permission from the Registrar of Companies.
- No Provision of Preference Share Capital- In Nidhi Company raising funds by way of preference share capital is not allowed.
- Dealing with members only- Nidhi Company are not allowed to deal with a person who is not a part of the company.
- No advertisement or solicitation- Ndhi Company cannot advertise or solicit any person for deposits.
- No Brokerage or Incentive- Nidhi companies cannot pay any brokerage or incentive to any person rather they can hire employees on fixed salary basis as it is not restricted by law.
- Cannot open a current account- Nidhi Companies are not allowed to open a current account with members. It is considered as mutual benefit company and hence government does not want these Nidhi companies to commercialize.
- No service charge on the membership- While issuing any shares, nidhi Company cannot charge any service charge from its members.
- No Partnership is allowed- Nidhi companies are not allowed to enter into a Partnership firm for the purpose of borrowing or lending activities.
- Limited within a State- Nidhi companies are not allowed to open a account or branch outside the state of functioning.
- Cannot add Body Corporate- Nidhi Companies cannot add any body corporate like Private Limited companies do, because the members of Nidhi companies cannot accept deposit from these Body corporate.
Conclusion
Nidhi Companies have lots of Limitations in india before for its application, therefore it is always advisable to seek permission of an expert to guide for the Application of Nidhi company License. whereas , NBFC in India offers a wide range of financial services such as loans, chit-funds, and these are different from banks. NBFCs plays a very crucial role in a developing country like us. Many economists have explained that NBFCs are very important for our economy to grow. For NBFC Registration or any information regarding NBFC and Nidhi Company Registration please contact BIATConsultant.