Key Difference Between Nidhi Company and Non-Banking Financial Companies (NBFC)
Introduction
Nidhi companies and non-banking financial companies (NBFCs) are two types of financial institutions that operate in India. While both Nidhi companies and NBFCs registration process are regulated by the Reserve Bank of India (RBI), they have different characteristics and serve different purposes. In this article, we will explore the meaning and differences between Nidhi companies and NBFCs.
Nidhi Company Meaning
A Nidhi company is a type of NBFC that is primarily involved in borrowing and lending money among its members. Nidhi companies are formed with the objective of cultivating the habit of thrift and savings among its members and providing them with access to credit. Nidhi companies are regulated by the Ministry of Corporate Affairs (MCA) and are required to comply with the Companies Act, 2013.
Nidhi companies are different from other NBFC registration processes in that they are not allowed to engage in any other financial activities such as insurance, chit funds, or hire purchase financing. Nidhi companies are also required to have a minimum of 200 members and a net-owned fund of at least Rs. 10 lakhs.
Non-Banking Financial Companies (NBFCs) Meaning
NBFCs are financial institutions that provide banking services without holding a banking license. NBFCs registration process are regulated by the RBI and are required to comply with the RBI’s guidelines and regulations. NBFCs can engage in a wide range of financial activities such as lending, investment, and insurance. NBFCs are different from banks in that they cannot accept demand deposits, issue checks, or provide payment and settlement services. However, NBFCs can accept time deposits and provide loans and advances.
What are the key differences between Nidhi Companies and NBFCs?
Here is a tabular format highlighting the differences between Nidhi Companies and Non-Banking Financial Companies (NBFCs):
|
Characteristics |
Nidhi Companies |
Non-Banking Financial Companies |
|
Purpose |
It is primarily involved in borrowing and lending money among its members. |
It is engaged in a wide range of financial activities such as lending, investment, and insurance. |
|
Regulation |
Regulated by the Ministry of Corporate Affairs (MCA). |
Regulated by the Reserve Bank of India (ROI). |
|
Activities |
The companies are not allowed to engage in any other financial activities such as insurance, chit funds, or hire-purchase financing. |
It can engage in a wide range of financial activities. |
|
Membership |
It is required to have a minimum of 200 members. |
There is no minimum membership requirement. |
|
Net Owned Funds |
It is required to have a net-owned fund of at least Rs. 10 lakhs. |
There is no minimum net-owned fund requirement. |
|
Prior Approval from RBI |
Requires prior approval from RBI regarding the commencement of Business Activities. |
No need to obtain prior approval from RBI regarding the commencement of Business Activities. |
|
Registration Process |
Involves comparatively fewer compliance requirements than an NBFC. |
Lengthy in nature and involves a lot of compliance and intricacies. |
|
Partnership |
Not eligible to enter into a partnership with any other business format for the purpose of lending and borrowing. |
No such condition or restriction is applicable. |
Conclusion
In conclusion, Nidhi companies and NBFCs are two types of financial institutions that operate in India. While both Nidhi companies registration and NBFCs are regulated by the RBI, they have different characteristics and serve different purposes. Nidhi companies are primarily involved in borrowing and lending money among its members, while NBFCs can engage in a wide range of financial activities such as lending, investment, and insurance. Understanding the similarities and differences between Nidhi companies and NBFCs can help individuals and businesses choose the best financial institution for their needs.
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