Maximum Rate of Interest on Loan – Rule 16 of Nidhi Rules, 2014
by Paras Mehra 22.7K
As per rule 16, the rate of Interest to be charged on any loan given by a Nidhi shall not exceed seven and half percent above the highest rate of interest offered on deposits by Nidhi. In other words, 7.5% is the gross margin that a Nidhi Company can earn from its operations.
We can form a formula out of the above explanation:
Maximum Rate of Interest on Loan = 7.5% + Maximum rate offered on deposits.
Let us also understand this by way of example:
| Fixed Deposits | Recurring Deposits | Savings | Margin | Maximum rate of interest on loan |
|---|---|---|---|---|
| 8% | 6% | 4% | 7.5% | 15.5% |
| 6% | 7% | 5.5% | 7.5% | 14.5% |
| 6.5% | 7.6% | 7.9% | 7.5% | 15.1% |
Understanding the terms in law is the most important task. As per rule 16, 7.5% can be added to the maximum interest rate offered on deposits. Deposits include Saving, Fixed Deposits and Recurring deposits.
So, even if I have 99% recurring deposits and 1% fixed deposits with higher Interest rate offered, in that case, the 7.5% margin will be added to Interest offered on Fixed Deposits. Hence, the margin of Nidhi Company can be more than 7.5% if properly planned.
Relationship with RBI
Also, you must remember that though Nidhi Companies are not registered with Reserve Bank, somehow Reserve Bank does affect the working of Nidhi Companies. Let us understand how this chain actually works:
Conclusion
These compliances are much more important than just registering the company and hence, it is always important to comply properly with the norms to keep your company legally fit. In the case of any doubt, you may contact us anytime or directly email to us at paras@hubco.in.