Can Nidhi Company do Microfinance Loans?

Nidhi Companies are not allowed to do a Microfinance in India. This has been specifically restricted to Non-Banking Financial Companies (NBFC) with a minimum net owned fund of Rs. 5 Crore.

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Nidhi Company is not allowed to provide unsecured loans to its members. Nidhi Company can only lend a secured loan to its members.

Nidhi companies can advance loan only towards the following securities:

  • Gold Loan: This is one of the main streams of business for Nidhi Companies. Gold loan by Nidhi Companies are very popular and 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.

  • The rate of interest shall not exceed 7.5% plus the maximum rate of interest on gold loan.

  • A Nidhi Company can advance maximum loan of 200,000 if deposits does not exceed Rs. 2 Crore.

  • Loan against immovable Property: This type of loan is not very popular with Nidhi Company. This loan is also subject to certain conditions:
  • The maximum loan can be rs. 200,000 if deposits does not exceed Rs.2 Crore.

  • The repayment period of loan shall not exceed 60 months.

  • The maximum finance can be up to 50%.

  • Further, this type of loan cannot exceed 50% of the total loan amount.

  • Loan against FDR and Deposits: Nidhi can advance loan against FDR and also even against the 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 shall be up to the value of Fixed Deposit under Nidhi Company.

  • Loan Against NSC / Bonds: This type of loan are very rare but Nidhi company can advance loan against these securities as well.
  • Unsecured loan by Nidhi Company: This type of loan is completely prohibited by Nidhi Company.
  • Vehicle (Car Loan) Finance: This type of loan is also not allowed under Nidhi Company. Vehicle finance restricted to Non-Banking Financial Companies (NBFC) in India.

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