an in in ndia      12.37
     any mutual benefit society58 notified by the Central                   Nidhis are companies registered under the
     / Union Government as a Nidhi Company.                            Companies Act, 1956 and are regulated by the
     They are created mainly for cultivating the habit                 Ministry of Corporate Affairs (MCA). Even
     of thrift and savings amongst its members. The                    though Nidhis are regulated by the provisions
     companies doing Nidhi business, viz., borrowing                   of the Companies Act, 1956, they are exempted
                                                                       from certain provisions of the Act, as applicable to
     from members and lending to members only,
                                                                       other companies, due to limiting their operations
     are known under different names such as Nidhi,
                                                                       within members.
     Permanent Fund, Benefit Funds, Mutual Benefit
                                                                            Nidhis are also included in the definition of
     Funds and Mutual Benefit Company.
                                                                       NBFCs, which operate mainly in the unorganised
          Nidhis are more popular in South India                       money market. However, since 1997, NBFCs have
     and are highly localised single office institutions.              been brought increasingly under the regulatory
     They are mutual benefit societies, because their                  ambit of the RBI. Non-banking financial entities
     dealings are restricted only to the members;                      partially or wholly regulated by the RBI include:
     and membership is limited to individuals. The                          (i) NBFCs comprising equipment leasing
     principal source of funds is the contribution from                          (EL), hire purchase finance (HP), loan
     the members. The loans are given to the members                             (LC), investment (IC) [including primary
     at relatively reasonable rates for purposes, such as                        dealers (PDs) and residuary non-banking
     house construction or repairs and are generally                             companies (RNBCs);
     secured. The deposits mobilised by Nidhis are not                     (ii) Mutual benefit financial company
     much when compared to the organised banking                                 (MBFC), i.e., nidhi company;
     sector.                                                              (iii) Mutual benefit company (MBC), i.e.,
                                                                                 potential nidhi company; i.e., a company
       58.  Mutual Benefit Society (also known globally                          which is working on the lines of a
            as ‘benefit society’ or ‘mutual aid society’) is an
                                                                                 Nidhi company, but has not yet been so
            organisation, or voluntary association formed to provide
            mutual aid, enefit, or insurance for relief from common              declared by the Central Government;
            difficulties. Such organisations may be formally                     has minimum net owned fund (NOF)
            organised with charters and established customs, or                  of Rs.10 lakh, has applied to the RBI for
            may arise ad hoc to meet unique needs of a particular
            time and place. They may be organised around a shared                certificate of registration and also to the
            ethnic background, religion, occupation, geographical                Department of Company Affairs (DCA)
            region or other asis. enefits may include money or                   for being notified as a Nidhi company
            assistance for sickness, retirement, education, birth of
            a baby, funeral and medical expenses, unemployment.                  and has not contravened directions /
               ften enefit societies provide a social or educational             regulations of RBI/DCA.
            framework for members and their families to support
            each other and contribute to the wider community.
                                                                          (iv) Miscellaneous non-banking company
                  A enefit society may have some common features                 (MNBC), i.e., chit fund company.
            – members having equivalent opportunity in the                  Since Nidhis come under one class of NBFCs,
            organisation mem ers having equivalent enefits aid
                                                                       RBI is empowered to issue directions to them
            goes to needy (stronger helping the weaker); payment
            of enefits y collection of funds from the mem ers          in matters relating to their deposit acceptance
            educating others about a group’s interest; preserving      activities. However, in recognition of the fact that
            cultural traditions; and mutual defence. Examples of       these Nidhis deal with their shareholder-members
              enefit societies include trade unions, self help groups,
            etc. It is believed that such societies predate human      only, RBI has exempted the notified Nidhis from
            culture are found around the world.                        the core provisions of the RBI Act and other