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The Ministry of Corporate Affairs (MCA) has amended rules governing Nidhi companies, whereby its prior declaration will be mandatory for certain entities before they start accepting deposits. Now, public companies desiring to function as Nidhis must obtain prior declaration from the central government before accepting deposits, the Ministry said in a release on Wednesday.
“To safeguard the interest of the general public, it has become imperative that before becoming its member, one must ensure declaration of a company as a Nidhi by the central government,” it said.
A Nidhi company, especially popular in southern states like Tamil Nadu, is a non-banking financial company. The core business of Nidhi companies is borrowing and lending money between their members.
“For timely disposal, it has also been provided in amended rules that in case no decision is conveyed by the central government within 45 days of the receipt of applications by companies in NDH-4 form, approval will be deemed as granted. This will apply for such companies which shall be incorporated after Nidhi (Amendment) Rules, 2022,” the release said.
The ministry said during 2014-2019, more than 10,000 companies got incorporated. However, only about 2,300 companies applied in form NDH-4 for declaration. “It has been noticed from examination of form NDH-4 that companies have not been complying with the applicable provisions of the Act and the Nidhi Rules, 2014 (as amended),” it said.
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