A NIDHI Company is notified under section 620-A of the Companies Act and is classified as "Mutual Benefit Financial Company" by the RBI. Essentially, a Nidhi Company differs from a regular finance investment company or a Non-Banking Finance company (NBFC), as it deals only with its shareholders or members, for mutual benefits of its members. A Nidhi Company accept deposits only its members and lends funds only to them on demand. A Nidhi Company is not entitled to carry out business/activities related with hire purchase financing, leasing finance, chit funds, acquisition of securities issued by any corporate body, etc. or issue any debt instruments (such as preference share, debentures, etc.) in any form.
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