Ministry of Corporate Affairs issues Public Advisory for Nidhi Companies operating in Non-Banking Finance Sector

The Registrar of Companies in Puducherry circulated a new public advisory of the Ministry of Corporate Affairs (MCA) for Nidhi companies as part of recent measures to tighten regulations for these entities operating in the non-banking finance sector Is.

The advisory note lists the Do’s and Don’ts for such companies, which enter into Memorandum of Association for the sole purpose of inculcating the habit of thrift and savings among its members, to receive deposits and lend only from its members. is defined. , for their mutual benefit.

Nidhi institutions are prohibited from carrying on the business of chit funds, hire purchase finance, lease finance, insurance or acquisition of securities issued by any corporate. They are barred from issuing preference shares, debentures or any other debt instrument by whatever name or in any form.

The MCA prohibited Nidhi Institutions from accepting deposits from or lending to any person other than its members, pledging any property deposited by its members as security, accepting deposits or lending money to any corporate giving, or entering into any partnership arrangement. Borrowing or lending activities.

A Nidhi company cannot raise loans from banks or financial institutions or any other source or admit any body corporate or trust as a member for the purpose of granting loans to its members.

The MCA advisory clearly states that the Central Government accepts no responsibility for the financial soundness of, or the correctness of, any statements made or representations made by the Nidhi Company. The advisory added that the deposits accepted by such entity are not insured and the repayment of the deposits is not guaranteed by the Central Government or the Reserve Bank of India.