About nidhi company

In India, Nidhi companies are governed by the Companies Act, 2013 and the Nidhi Rules, 2014. While the Nidhi Rules specify various operational constraints, it is important to note that Nidhi companies are generally discouraged from handling large cash transactions due to broader regulatory frameworks and compliance standards aimed at preventing financial irregularities.

Cash Transactions and Regulatory Compliance

• Income Tax Act Restrictions: Regardless of specific Nidhi rules, all entities in India are subject to the Income Tax Act, 1961. Specifically, Section 269SS prohibits the acceptance of any loan or deposit in cash if the amount is ₹20,000 or more. Similarly, Section 269T prohibits the repayment of any loan or deposit in cash if the amount is ₹20,000 or more.

• General Compliance: Because Nidhi companies operate as member-only financial institutions, they must maintain high standards of transparency. Handling significant volumes of cash is often viewed as a compliance risk by regulatory authorities.

• Recommendation: To ensure you remain in full compliance with both Nidhi-specific regulations and the Income Tax Act, it is highly advisable to conduct all loan disbursements and deposit acceptances via account payee cheques, demand drafts, or electronic fund transfers (NEFT/RTGS/IMPS).

Summary of Key Nidhi Regulations

While you asked about cash limits, please be aware of these fundamental regulatory requirements for Nidhi companies:

• Loan Limits: A Nidhi company's ability to grant loans is tiered based on the total amount of deposits it holds:

  • Deposits < ₹2 crore: Max loan of ₹2 lakh.

  • Deposits ₹2 crore – ₹20 crore: Max loan of ₹7.5 lakh.

  • Deposits ₹20 crore – ₹50 crore: Max loan of ₹12 lakh.

  • Deposits > ₹50 crore: Max loan of ₹15 lakh.

• Deposit Cap: A Nidhi company cannot accept deposits exceeding 20 times its Net Owned Funds (NOF).

• No Unsecured Loans: Nidhi companies are generally prohibited from providing unsecured loans; all loans must be secured against specific assets like gold, immovable property, or fixed deposit receipts.

If you are a professional or manager of a Nidhi company, it is recommended that you consult with a Chartered Accountant to ensure your current transaction practices align with the most recent MCA notifications and Income Tax guidelines.