Nidhi Company Loan – Know about loan and interest
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All you need to know about Nidhi Company Loans
In this article, we will discuss about the maximum rate of interest that a Nidhi Company can charge on loan given to its members and types of loans it can provide. As per Companies Act, 2013 interest on a loan made by Nidhi company is regulated by MCA and Nidhi company registered under the act cannot charge interest on loan more than interest rate specified by MCA & RBI.
What is the maximum Loan Limit of a Nidhi Company?
As per the law, a Nidhi company can give loan upto Rs.2 lakh if the amount of deposits is less than two crore rupees. Further details are as follows:
|If Deposit Amount is||Then Loan Limit is|
|Deposit is less than two crore rupees.||Two Lakh Rupees|
|Deposits are more than two crore but less than twenty crore rupees||Seven lakh fifty thousand rupees|
|Deposits are more than twenty crore but less than fifty crore rupees||Twelve lakh rupees|
|Total amount of deposits is more than fifty crore rupees||Fifteen Lakh rupees|
Whether Nidhi can grant Unsecured Loans
A nidhi company cannot give any unsecured loans to its members. Its entire loan must be secured by way of a security as prescribed below:
1. Gold, Silver and Jewellery
Nidhi Company can give loan against gold, that also called “Gold Loan”. Gold Loans are subject to certain rules and regulation as per Nidhi Rules, 2014. Here are the following conditions:
- The maximum finance against the gold shall be up to 80%.
- The maximum repayment period shall be 12 months.
2. Fixed / immovable Property
Generally Nidhi company business allowed giving secured loan against property. There are certain conditions for this type of loan that you must be follow:
- The repayment period of loan shall not exceed 60 months.
- The maximum finance can be up to 50%.
- Also, this type of loan cannot exceed 50% of the total loan amount.
3. Loan against Fixed Deposit and Other Cash Deposits
This type of loan is also advanced by Nidhi Company in India. A Nidhi company can give loan against FD and also even against the own deposits kept by it. Further, this type of loan is also subject to certain restrictions:
- The repayment period under this loan shall not exceed the period of Fixed Deposit.
- The maximum finance under this case will be up to the value of Fixed Deposit under Nidhi Company.
4. Loan Against National Savings Certificates (NSC) or Government Bonds
Nidhi company can advance loan against these securities as well.
What is Maximum Rate of Interest on Loan given by Nidhi Company?
According to rule 16, the rate of Interest to be charged on loan given by Nidhi can not go above seven and a half percent (7.5%) above the highest rate of interest offered on deposits by Nidhi Company. This means that 7.5% is the gross margin that a Nidhi Company is able to earn from the operations.
Loans which are not allowed by Nidhi Company
Nidhi Company is not allowed to give any loans which are mentioned below:
- Any type of unsecured loan: Nidhi can not grant any loan, by whatever name called, which is unsecured in nature. More specifically it can not grant loans stated as below.
- Micro Finance – Small Credit: Micro finance business is very famous especially in rural and semi urban areas. However, no company is allowed to do the business of micro finance, other than the registered NBFC.
- Vehicle Finance: The business of vehicle finance is also not allowed. The business of vehicle finance is also allowed only to a registered NBFC. These are all special categories and need a net worth of at least Rs.2 crores.
- Personal Loan: A Nidhi Company is not allowed to give money as personal loan. The loan has to be against any security as prescribed above.
- Hire Purchase: A Nidhi company can not undertake hire purchase business
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