The Ministry of Corporate Affairs has cautioned against investing in non-compliant Nidhi companies due to potential risks.
The Ministry of Corporate Affairs has issued an advisory to the public regarding 'Nidhi Companies' and their operations. The advisory urges individuals not to make investment decisions without a thorough background check, particularly when high returns are promised.
Nidhi companies are mutual-benefit firms regulated by the Corporate Affairs Ministry under the Companies Act, 2013, and Nidhi Rules, 2014. These entities can only accept deposits and provide loans to their members.
During the examination of NDH-4 applications, it was observed that numerous 'Nidhi' Companies are not adhering to the applicable provisions of the Act and rules made thereunder in entirety. This non-compliance poses potential risks to investors as deposits accepted by Nidhi Companies are not insured by the Deposit Insurance and Credit Guarantee Corporation.
In case a Nidhi company fails or is involved in fraud, recovery of deposited money can prove challenging or incomplete.
Source:
Akashvani News
