RAS question
Nidhi Companies are regulated under:
Correct answer: (D) Companies Act, 2013.
Nidhi companies are regulated under Section 406 of the Companies Act, 2013, along with the Nidhi Rules, 2014.
Explanation
Nidhi companies are mutual benefit societies regulated through the company-law framework, not through the securities or banking-law options listed in the question. The official Companies Act text places Nidhis in Chapter XXVI and Section 406 defines a "Nidhi" or "Mutual Benefit Society" as a company that the Central Government may declare as such by notification in the Official Gazette. The same section also allows specified provisions of the Act to apply to Nidhis with exceptions, modifications or adaptations. Nidhis accept deposits from, and lend to, their members only; they are exempt from RBI regulation; and FDI is prohibited in Nidhi companies. Therefore, the governing answer is the Companies Act, 2013, with the Nidhi Rules, 2014.
Why the other options are wrong
- (A) The SEBI Act is not the governing framework here because Section 406 places Nidhis under the Companies Act, 2013.
- (B) The Banking Regulation Act is not the answer because Nidhi companies are treated as mutual benefit societies under company law and are exempt from that banking-law route.
- (C) The RBI Act is wrong because Nidhi companies are exempt from RBI regulation.
Concept
This tests the regulatory classification of financial intermediaries in the Indian Economy syllabus. It recurs in RAS because Nidhis look banking-like in function but are legally anchored in company law.