Q. With reference to NIDHI companies in India, consider the following statements:
1.Nidhi companies are a category of Non-Banking Financial Companies (NBFCs) regulated primarily by the Reserve Bank of India (RBI).
2.Their primary function is to borrow from and lend to their members only, and they are prohibited from issuing preference shares or debentures.
Which of the statements given above is/are correct?
Answer: B
Notes:
Explanation:
Statement 1: Incorrect. Nidhi companies are NBFCs but are exempted from the core provisions of the RBI Act. They are primarily regulated by the Ministry of Corporate Affairs (MCA) under Section 406 of the Companies Act, 2013, due to their unique nature of catering only to members.
Statement 2: Correct. The foundational principle of a Nidhi is mutual benefit, operating only with its members. They are prohibited from conducting business other than lending and borrowing, which includes a prohibition on issuing preference shares, debentures, or any debt instrument to the public.
