Central Government Amends Nidhi Rules, 2014.

Why in news?

• Development comes amid a sharp rise in number of ‘nidhi’ companies and is aimed at improving their governance and safeguarding public interest.

Key amendments

• A public company set up as a Nidhi with share capital of Rs. 10 lakhs needs to first get itself declared as a Nidhi from Union government. Earlier, there was no such need for a company to get declaration.
• Promoters and Directors of company have to meet the criteria laid down in rules.

About Nidhi company

• Similar to a Non-Banking Financial Company, a Nidhi is formed to borrow and lend money to its members. It inculcates saving habits among its members and works on the principle of mutual benefit.
• Not required to get an RBI license but need approval under the Companies Act.
• Ministry of Corporate Affairs regulates its operational matters and RBI has the power to issue directions for its deposit-taking activities.
• Can’t deal with chit funds, hire-purchase finance, leasing finance, insurance or securities business. It is strictly prohibited from accepting deposits from or lending funds to, any other person except members.
• Only individual members are allowed in Nidhi companies.