1. Prohibition under Nidhi Rules, 2014

• Nidhi Companies are strictly prohibited from providing unsecured loans.
  
• Rule 6 of the Nidhi Rules, 2014 mandates that all loans must be backed by security.
  
• The objective is to ensure financial discipline and protect members’ deposits.
  
• Violation of this rule can lead to regulatory action and loss of Nidhi status.
  
• Secured lending is a core compliance requirement for Nidhi operations.
  

2. Requirement for Acceptable Collateral

• Nidhi Companies must issue loans only against tangible securities.
  
• Acceptable collateral includes gold, fixed deposit receipts, immovable property, or other approved assets.
  
• The value of the security must adequately cover the loan amount.
  
• The security must be documented, valued, and held by the company until repayment.
  
• Without proper collateral, no loan disbursement is allowed.
  

3. Risk Control and Member Safety

• Secured loans reduce the risk of default and loss of funds.
  
• The restriction on unsecured loans ensures that member deposits remain safe.
  
• It prevents misuse of funds and promotes responsible lending.
  
• Lending against security also aligns with the mutual benefit principle.
  
• The regulation enforces internal accountability and stability.
  

4. Regulatory Oversight and Penalties

• The Ministry of Corporate Affairs monitors compliance with Nidhi Rules.
  
• Offering unsecured loans may lead to inquiries, inspections, and penalties.
  
• The company may face cancellation of the Nidhi classification.
  
• Directors and responsible officers may be held liable for non-compliance.
  
• Annual filings must disclose the nature and terms of all loans issued.
  

5. Permitted Secured Loan Types

• Nidhi Companies are allowed to provide loans against gold and jewellery.
  
• Loans can be issued against fixed or recurring deposit receipts.
  
• Property-backed loans may be permitted based on legal and financial review.
  
• A loan against member shares or savings within the company may also be allowed.
  
• All loans must be issued within the financial limits and ratios set under the Nidhi Rules.