Housing Finance Company is a form of non-banking financial company and that’s why it is able to carry business related to chit fund, hire purchase finance and leasing finance. While Nidhi Company is restricted to carry such businesses.
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Housing Finance Companies
- Housing Finance Company is a form of non-banking financial company which is engaged in the principal business of financing of acquisition or construction of houses.
- It includes the development of plots of lands for the construction of new houses.
- The company is engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority.
- Housing Finance Companies are regulated by the National Housing Bank.
- Any non-banking finance company can operate as a housing finance company, subject to the fulfilment of basic requirements as specified in the Companies Act, 1956.
- Basic requirements:
- Primary business should be of providing finance for housing (directly or indirectly).
- Should obtain a certificate of registration (COR) from the National Housing Bank (NHB). Without a COR, NHB can demand the winding up of such company.
- Should have minimum Net Owned Fund of Rs 10 Crore.
- Section 406 of the Companies Act 2013 govern Nidhi Companies.
- It belongs to the nonbanking Indian finance sector. Their main business is to borrow money or lend money to its members.
- Nidhi Companies are regulated by Ministry of Corporate Affairs, Government of India and Reserve Bank of India Reserve Bank of India is empowered to give directions regarding the matters related to acceptance of deposits.
- Nidhi Companies have restrictions for Chit Fund, Hire Purchase Finance, Leasing Finance.
- It cannot open a current account with its members. Also issuance of advertisement for deposits and brokerage for granting a loan to its members are not allowed to Nidhi companies.
- To cultivate the habit of savings among its members.
- To receive or lend deposits to its members for their mutual benefit.
- A public company under the Companies Act 2013.
- Must have a minimum equity share capital of 5,00,000.
- No issuance of preference shares. Previous shares shall be redeemed as per the terms of the issue of such shares.
- Its name must have Nidhi Limited.