Introduction

Nidhi Companies were created with the core objective of encouraging savings and providing financial assistance to their members. One of the most common queries among both promoters and members is: What types of loans can a Nidhi Company give, and what are the limits?

Rule 15 of the Nidhi Rules, 2014, as amended, provides the complete framework for loan disbursement. These provisions regulate not only the maximum loan amount that can be given, but also the security against which loans may be granted, repayment periods, and restrictions in case of defaults or losses.

Who Can Get Loans from a Nidhi?

A Nidhi can provide loans only to its members. Unlike banks or NBFCs, it cannot extend loans to outsiders.

In the case of joint shareholders, the loan is provided to the member whose name appears first in the Register of Members. This prevents confusion and ensures clarity of ownership.

Loan Limits Based on Deposits

The ability of a Nidhi to grant loans depends directly on the total deposits it holds from its members, as shown in the last audited financial statements.

Total Deposits of Nidhi	Maximum Loan Limit per Member
Less than ₹2 crore	₹2,00,000
₹2 crore – less than ₹20 crore	₹7,50,000
₹20 crore – less than ₹50 crore	₹12,00,000
More than ₹50 crore	₹15,00,000

This proportional framework ensures that loan disbursal remains realistic and linked to the financial capacity of the Nidhi.

Profitability Condition for Loans

If a Nidhi has not made profits continuously for the past three financial years, it cannot disburse loans at the maximum limits. Instead, it can only give up to 50% of the permissible loan limits. Example: If a Nidhi with deposits of ₹25 crore (eligible limit ₹12 lakh) has no profits in the last three years, then the maximum loan to a member would be only ₹6 lakh.

Restrictions on Defaulting Members

A member who has already taken a loan and defaulted in repayment cannot be given any further loan until the earlier loan is cleared. This condition protects the Nidhi’s financial health and discourages habitual defaults.

Securities Against Which Loans Can Be Granted

Nidhis cannot lend without security. The law specifies the exact types of collateral accepted:

1. Gold, Silver, and Jewellery

• Loans can be given against ornaments.
• Repayment period cannot exceed 1 year.
• This is the most common type of loan for Nidhis because it provides quick liquidity.

2. Immovable Property

• Loans against property are permitted but with restrictions:
  • Total loans against immovable property must not exceed 50% of overall loans outstanding on the date of Board approval.
  • The individual loan cannot exceed 50% of the property’s value.
  • Maximum repayment period = 7 years.

Example: If a property worth ₹20 lakh is pledged, maximum loan available = ₹10 lakh, and it must be repaid within 7 years.

3. Fixed Deposits, NSCs, Government Securities, and Insurance Policies

• Such securities must be duly discharged and pledged with the Nidhi.
• The maturity date of the security must not go beyond the loan period or one year, whichever is earlier.
• For loans against fixed deposits, the loan period cannot exceed the unexpired term of the FD.

This ensures that the Nidhi always has tangible collateral that matures within the loan cycle.

Why These Restrictions?

The restrictions in Rule 15 are not hurdles but safeguards. They exist to:

• Prevent over-lending beyond capacity.
• Ensure loans are always backed by adequate security.
• Link loan eligibility with financial stability of the Nidhi.
• Protect depositors’ funds, since loans are disbursed from pooled member savings.

Practical Example – Loan Eligibility

Case A: Small Nidhi

• Deposits = ₹1.5 crore
• Eligible loan limit = ₹2 lakh per member
• Security = Gold jewellery worth ₹3 lakh pledged
  Loan sanctioned = ₹2 lakh

Case B: Medium Nidhi

• Deposits = ₹30 crore
• Eligible loan limit = ₹12 lakh per member
• Security = Property worth ₹50 lakh pledged
  Maximum loan sanctioned = ₹12 lakh (capped even though property value allows more)

Case C: Non-Profitable Nidhi

• Deposits = ₹60 crore
• Normal limit = ₹15 lakh
• No profit in last 3 years → only 50% allowed
  Maximum loan sanctioned = ₹7.5 lakh per member

Case Reference – MCA Action on Loan Irregularities

In several penalty orders, the MCA has acted against Nidhis that:

• Gave loans beyond prescribed limits,
• Provided loans without proper collateral, or
• Lent to non-members.

One such case involved a Nidhi granting unsecured loans to outsiders, leading to penalties under Section 406 of the Companies Act and contravention of Rule 15. This shows that compliance with loan rules is strictly enforced.

Conclusion

Loans are the lifeblood of Nidhi Companies, but they must be carefully managed. Rule 15 ensures that lending is restricted to members, proportionate to deposits, backed by security, and within fixed time limits.

For promoters, this means loan policies must be aligned with the last audited financial statements and profits. For members, these rules provide assurance that loans are available but within safe, transparent limits. Ultimately, Rule 15 balances the twin goals of Nidhis: mutual benefit and depositor protection.

Frequently Asked Questions (FAQs)

Q1. Who can take loans from a Nidhi Company?
Only members of the Nidhi are eligible. Outsiders cannot borrow.

Q2. What is the maximum loan amount in a Nidhi?
It depends on deposits:

• Up to ₹2 lakh for small Nidhis (<₹2 crore deposits).
• Up to ₹15 lakh for large Nidhis (>₹50 crore deposits).

Q3. Can a member with unpaid loans get another loan?
No. A member in default is not eligible for fresh loans.

Q4. Can Nidhis give personal loans without security?
No. Every loan must be backed by specified securities such as gold, property, or government instruments.

Q5. What is the maximum repayment period for loans against property?
Seven years. Also, property loans cannot exceed 50% of overall outstanding loans.

Q6. What is the rule for loans against jewellery?
Loan repayment must be completed within one year.

Q7. Can Nidhis charge high interest rates on loans?
No. Interest rates are regulated and usually capped at levels that prevent exploitation. They must remain reasonable and aligned with MCA guidelines.