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What is the difference between Chit Fund & Nidhi Company?

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This article discusses the basic difference between chit fund & Nidhi company. First, let us give a basic understanding as to what is a Chit Fund and Nidhi Company:

Nidhi company

Nidhi company registration is done under section 406 of the companies act 2013 and notified as a Nidhi company by the focal govt. u/s 620A of the companies act. It is an NBFC doing the business of lending and borrowing with its members and shareholders. Nidhi” is a Hindi word, which means finance or fund. Nidhi means a company that has been incorporated with the object of developing the habit of thrift and reserve funds amongst its members and also receiving deposits and lending to its members only for their mutual benefit. There is a huge difference between the chit fund & Nidhi company.

Chit fund

A chit store is a sort of saving scheme practised in India. A chit support company implies a company overseeing, conducting, or supervising As foreman, agent or some other limit, chits as defined u/s 2 of the chit funds act 1982, as indicated by section 2(b) of chit fundact 1982, chit implies a transaction whether called a chit, chit subsidize, chitty, Kuri, or by some other name or by which a person goes into an agreement with a specified no. of persons, that everyone should subscribe a certain entirety of money ( or a certain amount of grain instead ), by method for periodical instalments over a definite period and that each such subscriber might, in his turn, as determined by part or by auction or by delicate or in such other manner as might be specified in the chit agreement, be entitled to the prize amount.

Difference between Chit fund & Nidhi company

The basic difference between a Chit fund & Nidhi company is that a Nidhi Company is a non-financial banking company that can either lend or accepts deposits only whereas the latter i.e., Chit fund is also a committee as Nidhi Company but they only accept instalments over a fixed period of time which is paid by its members, they neither do lend nor accept the amount as a whole unlike the Nidhi Company, they just do accept amounts in small instalments.

Such chit finance schemes might be conducted by composer financial institutions or might be unorganized schemes conducted among companions and relatives. There are additional varieties of chits where savings are accomplished for a particular reason. Chit support likewise paid an important role in the financial development of people of a few states, for example, Kerala. providing easier access to credit.

This is the basic difference between the chit fund & Nidhi company.

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