The Ministry of Corporate Affairs has issued an advisory to the common public about ‘Nidhi Companies’ and their functioning. The Ministry has warned against investment decisions without a proper background check, especially if there is a promise of high returns.
The Nidhi companies are mutual-benefit companies regulated by the Corporate Affairs Ministry under the Companies Act, 2013 and Nidhi Rules, 2014, which can accept deposits and give loans only to their members.
The Ministry said that during examination of NDH-4 applications, it was noticed that many ‘Nidhi’ Companies are not complying with the applicable provisions of the Act and rules made there under in toto.
The Ministry informed that the deposits accepted by Nidhi Companies are not insured by the Deposit Insurance and Credit Guarantee Corporation. It added that if the company fails or faces fraud, recovery of deposited money can be very difficult or incomplete.
