Only 395 companies declared as Nidhis so far; mandatory NDH-4 filing reiterated
New Delhi, September 24: The Ministry of Corporate Affairs (MCA) has cautioned the public against making investment decisions based solely on promises of unusually high returns by Nidhi companies and advised prospective investors to verify their regulatory status before depositing money.
The advisory follows the MCA’s examination of applications filed in Form NDH-4, during which the ministry found that several companies functioning as Nidhi companies were not fully complying with the applicable provisions of the Companies Act and Nidhi Rules.
The ministry also noted that several companies functioning as Nidhis had not submitted their mandatory NDH-4 applications within the prescribed timeframe.
NDH-4 filing mandatory
The MCA reiterated that every company seeking to function as a “Nidhi” is required to file an application in Form NDH-4 to get itself declared or updated as a Nidhi.
The ministry said some companies have been found to lure members by promising unusually high returns.
The public has therefore been advised not to rely solely on such promises or informal assurances from agents while making financial decisions. Investors have been asked to independently verify whether the concerned company has been declared a Nidhi by the Central Government and to carefully consider the terms before depositing money.
Deposits not insured by DICGC
The MCA specifically cautioned that deposits accepted by Nidhi companies are not insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
In case a company fails or becomes involved in fraud, recovery of deposited money could be difficult or incomplete, the ministry said.
Nidhi companies are mutual-benefit companies regulated by the MCA under the Companies Act, 2013 and the Nidhi Rules, 2014. They are permitted to accept deposits and provide loans only to their members.
Only 395 companies declared as Nidhis
The ministry said amendments to Section 406 of the Companies Act, 2013 and the Nidhi Rules, 2014, effective from August 15, 2019, reintroduced the requirement for companies to be declared as Nidhis by the Central Government.
As of now, 395 companies have been declared as Nidhis by the Central Government under the relevant provisions of the Companies Act, 1956/2013.
The MCA said the list of active Nidhi companies is available on its website for public information and verification.
