Nidhi Companies


The primary object of Nidhis is to carry on the business of accepting deposits and lending money to member-borrowers only against jewels, etc., and mortgage of property. For over a century Nidhis, with the objective of cultivating the habit of thrift, generally promoted by public spirited men drawn from affluent local persons, lawyers and professionals like auditors, educationists, etc., including retired persons. 

The area of operation was local – within municipalities and panchayats. Some Nidhis on account of their financial and administrative strength opened branches within the respective revenue district and even outside. The principle of mutual benefit has been incorporated to pool the savings from members and lend only to members and never have dealing with non-members. 

Nidhis were not expected to engage themselves in the business of Chit Fund, hire purchase, insurance or in any other business including investments in shares or debentures. As stated these Nidhis do their business only with Members. Such Members are only individuals. Bodies Corporate or Trusts are never to be admitted as Members in these companies.

In simpler terms, NIDHI companies are effectively non-banking financial companies and are engaged in the business of accepting deposits and making loans to their members. The recent failures in the NBFC sector also extended to the NIDHI companies compelling the Government to introduce strict prudential norms for such companies. The deposit taking activities of NIDHIs are governed by the RBI Act and guidelines made thereunder. The power to give exemptions to the NIDHI companies in the administration of NIDHI i.e. with the Ministry of Company Affairs.

This dual control leads to confusion in the administration of the provisions of the RBI Act and the Companies Act, 1956. Since, RBI is the regulator of all the NBFC incorporated under the Companies Act, the Committee felt that NIDHI companies should also be controlled by RBI through close supervision.

What does the name “Nidhi” means or naming Criteria of a Nidhi Company

As per section 406 of the Companies Act, 2013, “Nidhi” or “Mutual Benefit Society” means a company, which the Central Government may by notification in the Official Gazette, declare to be a Nidhi or Mutual Benefit Society, as the case may be.

Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and saving amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with the rules made by the central Government for regulation of such class of


In exercise of powers conferred under section 406 read with section 469 of the Companies Act, 2013, Central Government issued the Nidhi Rules, 2014 which came into force on the 1st day of April, 2014. Nidhi Rules,

2014 applicable to:

  • every company which had been declared as a Nidhi or Mutual Benefit Society under sub-section (1) of Section 620A of the Companies Act, 1956;
  •  every company functioning on the lines of a Nidhi company or Mutual Benefit Society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under sub- Section (1) of Section 620A of the Companies Act, 1956; and
  •  every company incorporated as a Nidhi pursuant to the provisions of Section 406 of the Companies Act, 2013.
  •  every company declared as Nidhi or Mutual Benefit Society under sub-section (1) of section 406 of the Companies Act, 2013.
  • Every “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.

Eligibility for registering a Nidhi Company

  1. A Nidhi shall be a public company and shall have a minimum paid up equity share capital of Rs. 5 lakh.
  2. Nidhi company shall not issue preference shares.
  3. If preference shares had been issued by a Nidhi before the commencement of the Companies Act, 2013, such preference shares shall be redeemed in accordance with the terms of issue of such shares.
  4. No Nidhi shall have any object in its Memorandum of Association other than the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.
  5. Every “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.

Minimum requirements of a Nidhi Company

Every Nidhi shall, before incorporation, ensure that it has-

  1. 7 members;
  2. 3 directors;
  3. No minimum Capital Requirement;
  4. No Preference Shares allowed to issue;
  5. The object of the company shall be receiving deposits from and lending to its members only for their mutual benefits.

Every Nidhi shall, within a period of one year from the date of its incorporation, ensure that it has–

(a) not less than 200 members;

(b) Net Owned Funds of Rs. 10 lakh or more;

(c) unencumbered term deposits of not less than 10% of the outstanding deposits; 

(d) ratio of Net Owned Funds to deposits of not more than 1:20.

It may be noted that “Net Owned Funds” means the aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet. Further, the amount representing the proceeds of issue of preference shares shall not be included for calculating Net Owned Funds.

If a Nidhi is not complying with clauses (a) or (d) of sub-rule (1) above mentioned, it shall within 30 days from the close of the first financial year, apply to the Regional Director in Form NDH-2 along with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for extension of time and the Regional Director may consider the application and pass orders within thirty days of receipt of the application.

Provided that, the Regional Director may extend the period upto 1 year from the date of receipt of application.

Membership of a Nidhi Company

  1. A Nidhi shall not admit a body corporate or trust as a member.
  2. Every Nidhi shall ensure that its membership is not reduced to less than two hundred members at any time.
  3. A minor shall not be admitted as a member of Nidhi.

It may be noted that deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.

Branches of Nidhi

  1. A Nidhi may open branches, only if it has earned net profits after tax continuously during the preceding three financial years. A Nidhi may open up to three branches within the district.
  2. If a Nidhi proposes to open more than 3 branches within the district or any branch outside the district, it shall obtain the prior permission of the Regional Director and intimation is to be given to the Registrar about opening of every branch within 30 days of such opening.
  3. Nidhi shall not open branches or collection centres or offices or deposit centres, or by whatever name called outside the State where its registered office is situated.
  4. Nidhi shall not open branches or collection centres or offices or deposit centres, or by whatever name called unless financial statement and annual return (up to date) are filed with the Registrar.
  5. A Nidhi shall not close any branch unless it –
  1. publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least 30 days prior to such closure, informing the public about such closure;
  2. fixes a copy of such advertisement or a notice informing such closure of the branch on the notice board of Nidhi for a period of at least 30 days from the date on which advertisement was published under clause (a) ; and
  3. gives an intimation to the Registrar within 30 days of such closure.

Loans by Nidhi Company

According to Rule 15 A Nidhi shall provide loans only to its members. The loans given by a Nidhi to a member shall be subject to the following limits, namely:–

  1. Rs. 2 lakh, where the total amount of deposits of such Nidhi from its members is less than Rs. 2 crore;
  2. Rs. 7,50,000, where the total amount of deposits of such Nidhi from its members is more than Rs. 2 crore but less than Rs. 20 crore;
  3. Rs. 12 lakh, where the total amount of deposits of such Nidhi from its members is more than Rs. 20 crore but less than Rs. 50 crore; and
  4. Rs. 15 lakh, where the total amount of deposits of such Nidhi from its members is more than Rs. 50 crore:

Where a Nidhi has not made profits continuously in the 3 preceding financial years, it shall not make any fresh loans exceeding 50% of the maximum amounts of loans specified in clauses (a), (b), (c) or (d).

A member shall not be eligible for any further loan if he has borrowed any earlier loan from the Nidhi and has defaulted in repayment of such loan.

The amount of deposits shall be calculated on the basis of the last audited annual financial statements. A Nidhi shall give loans to its members only against the following securities, namely:–

  1. gold, silver and jewellery, and the re-payment period of such loan shall not exceed 1 year.
  2. immovable property and, the total loans against immovable property [excluding mortgage loans granted on the security of property by registered mortgage, being a registered mortgage under section 69 of the Transfer of Property Act, 1882 (IV of 1882)] shall not exceed 50% of the overall loan outstanding on the date of approval by the board, the individual loan shall not exceed 50% of the value of property offered as security and the period of repayment of such loan shall not exceed 7 years.
  3. fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies.

It may be noted that such securities duly discharged shall be pledged with Nidhi and the maturity date of such securities shall not fall beyond the loan period or 1 year whichever is earlier and in the case of loan against fixed deposits, the period of loan shall not exceed the unexpired period of the fixed deposits.

The rate of interest to be charged on any loan given by a Nidhi shall not exceed 7.5% above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method. Nidhi shall charge the same rate of interest on the borrowers in respect of the same class of loans and the rates of interest of all classes of loans shall be prominently displayed on the notice board at the registered office and each branch office of Nidhi.

Documents/Details Required for Incorporation of a Nidhi Company

  1. Copy of PAN Card of Members/ Directors
  2. Passport size photograph of Members/ Directors
  3. Copy of Aadhaar Card of Members/ Directors
  4. Bank Statement/Electricity Bill/Telephone Bill of Members/ Directors
  5. Copy of Rent agreement of office premises executed on the name of Company.(If rented property)
  6. Copy of latest Electricity/Water/Gas/Telephone bill of registered office
  7. NOC from Landlord that he has no objection for using his premises as the registered office of Company.

Steps for incorporation

1. Name Approval in ‘RUN’ facility

The Applicants are required to file name availability in RUN facility of MCA portal. Every Company proposed to be incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name. Now, one doesn’t require digital signature of applicant for name availability.

2. Obtaining Digital Signature Certificate (DSC)
The proposed Directors who may also be the Promoters/Applicants of Nidhi Company have to obtain Class 2 DSC.

3. File form SPICe32

 After the name approval, File form SPICe 32 with following attachments for incorporation of Nidhi Company.

  • Memorandum of Association
  • Articles of Association
  • PAN Card of subscribers
  • Id Proof of First Directors
  • Address Proof of First Directors
  • Address Proof of Registered Office (Rent Agreement/Sale Deed)
  • Latest Utility Bill of Registered Office (Electricity/Telephone/Gas)
  • NOC of Owner of Registered Office
  • Consent and Declaration from first Director in form DIR-2
  • Self Declaration from First Directors and Subscribers in form INC-9

4. Approval and Certificate of incorporation

It will take 15-20 days to get the incorporation certificate of Nidhi Company once all the documents have been filed and registration fee and stamp duty paid. Incorporation certification is a proof that all the formalities regarding the incorporation have been complied with.

Advantages of a Nidhi Company

  1. Liability is Limited: Liability of Directors and shareholders of the Nidhi Company is limited. In case the company suffers from any loss and faces, financial distress in the course of it’s business activity, the personal assets of any of the Directors or members are not at risk of being seized by banks, creditors, and government.
  1. Less Regulations: “Nidhi” companies are governed under the Nidhi Rules, 2014. The Central Government is the regulating authority, which controls it’s activities and operations. Guidelines imposed by the RBI on “Nidhis” are very few.
  1. Better Credibility: “Nidhi” companies enjoy better credibility as opposed to any other member-based organizations like Trusts, Cooperative Societies or NGOs. 
  1. Better Option for Savings : The main purpose of a Nidhi Company’s incorporation is to encourage the habit of saving among the members of the Company. This is how it achieves the other goal of it’s registration of being mutually beneficial. The Nidhi Companies are to “lend and borrow money” to and from it’s shareholders/members only.
  1. Easy Access of Public Funds: The loans from the Nidhi Company come at a cheaper rate than loans from banks and other NBFCs, for it’s shareholders. And the process of obtaining the loan and customized services are much more convenient and quicker.
  1. Ease of Fund: Nidhi Company is the safest and the cheapest way of inviting deposits from the general public. You just need to take them as registered members.
  1. Micro Banking: Nidhis provide banking services to the remote and rural public of India which still is based in far-off locations and is, hence, devoid of accessing finance from national banks and NBFCs.
  1. It acts as a “Better Credit Co-operative Society”: Nidhi Company is a close substitute for credit co-operative society. And, therefore, more preferred by the small financer. Once a Nidhi company has been registered, the members can avail of all the benefit’s of a credit co-operative society.
  1. Simple Processing: Borrowing and lending to known persons, belonging to the same group, is much less complicated than dealing with banks, where the procedure is impersonal and fixed.
  1. Easy Registration Process: You don’t need to take any license from RBI. You just have to incorporate your company as a public limited one with the MCA.
  1. Single Regulatory Body: After the Amendment in Companies act 2013, Nidhi Companies are overseen by Nidhi Company Rules.
  1. Low Capital Requirement: Ministry of Corporate Affairs (MCA) commands the minimum capital requirement of Rs.5 lakhs for the incorporation of a “Nidhi”. And, within 1-year, the capital has to be raised to at least Rs.10 lakhs. The Fees, DIN, DSC & Other Expenses are approx. Rs.25-30,000. These include Government fees that differ from State to State.
  1. Fulfilling the needs of Lower & Middle-income groups: Nidhi Companies play an important role in meeting the needs of lower and middle-income groups by providing them financial help without complex formalities and documentation.
  1. Easier Eligible: People getting minimum wages and belonging to lower strata are usually unable to take loans from traditional banks because of their high eligibility criteria. For them, Nidhi Company is a good option to obtain finance because of fewer conditions.
  1. No External Involvement: Nidhi Companies take funds from their members and further provides loans to their members only. All transactions are done within this group only. So, no external factors are affecting the working of these companies. The investors/members themselves oversee the operations of the company.
  1. Separate Entity: Nidhi Company is a separate legal entity that can acquire assets and incur debts in its own name.

Limitation of a Nidhi Company

Nidhi Company shall not –

  1. carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate;
  1. issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever;
  1. open any current account with its members;
  1. acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi;
  1. carry on any business other than the business of borrowing or lending in its own name. Nidhis which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding twenty per cent of the gross income of the Nidhi at any point of time during a financial year.
  1. accept deposits from or lend to any person, other than its members;
  1. pledge any of the assets lodged by its members as security;
  1. take deposits from or lend money to any body corporate;
  1. enter into any partnership arrangement in its borrowing or lending activities;
  1. issue or cause to be issued any advertisement in any form for soliciting deposit. It may be noted that private circulation of the details of fixed deposit Schemes among the members of the Nidhi carrying the words “for private circulation to members only” shall not be considered to be an advertisement for soliciting deposits.
  1. pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or for granting loans.

Annual Compliances as per Company Act of Nidhi Company

  1. Within 90 days from the close of the first financial year after its incorporation and where applicable, the second financial year, Nidhi shall file a return of statutory compliances in Form NDH-1 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 with the Registrar duly certified by a company secretary in practice or a chartered accountant in practice or a cost accountant in practice.
  1. If the company is not complying with the minimum member criteria, it shall within 90 days from the close of the first financial year, apply to the Regional Director in Form NDH -2 for extension of time and the Regional Director may consider the application and pass orders within 30 days of the receipt of the application.
  1. The Auditor of the company shall furnish a certificate every year to the effect that the company has complied with all the provisions contained in the rules and such certificate shall be annexed to the audit report and in case of non-compliance, he shall specifically state the rules which have not been complied with.
  1. As per Rule 21 of the Nidhi Rules, 2014, every Nidhi company required file half yearly return with the Registrar in Form NDH-3 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within thirty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice.
  1. The Nidhi Company has to file its Annual Returns with MCA through Form MGT-7.
  1.  The financial statements and other related documents are to be submitted, annually, in Form AOC-4.
  1. Nidhi Company, like all other businesses, must file its Annual Income Tax Returns by 30th September of the following financial year.

Compliances as per Income Tax Act for Nidhi Company

  1. Income Tax Return of the company.
  2. Income Tax Return of its Directors & Shareholders (advisable also file)

Winding Up of a Nidhi Company or Closure of a Nidhi Company

A Company closure is filed under Form STK 2 (Earlier form was FTE) along with the government fees of Rs.5000/- and some necessary docs. However it is important to note the cases where closure can be filed. A Company closure can be filed after the following steps:

  1. Pay all Liabilities: The first step is to repay all the liabilities of the company and ask for written No Objection Certificate from them. Nidhi Company involves a lot of deposits and hence NOC has to be taken from every member of the Company.
  2. Need 75% Consent: This is a very new requirement which is to be complied for Nidhi Limited Company closure. To wind up the company, you need at least 75% consent of the shareholders/members of the company Further, one director is also needs to be notified to take care of all the responsibility for company closure.
  3. Prepare Application: Once consent is assigned, next step is to prepare application and file the same with the ROC.
  4. Once no other person files for any objection, the company name is striked off.

Documents required before filing the strike off application

  • Indemnity Bond notarized by Directors (STK 3
  •  Statement of Accounts latest
  • Statement of Accounts containing assets & liabilities of the Company Audited by CA
  •  Affidavit in Form STK 4 by every Company
  •  Special Resolution or Consent of 75% Members
  • Bank Account Closure Certificates
  •  PAN Card of the Company

Frequently asked questions – FAQs

  1. What is Nidhi Company?

Ans. A Nidhi Company falls in the category of “Non-Banking Financial Companies (NBFCs)”, which does not require any license from the Reserve Bank of India (RBI). It is formed for the sole purpose of accepting deposits and lending loans to it’s members only. It works through it’s members only.

  1. Who can get Nidhi Company Registration?

Ans. The Nidhi company must be registered as a Public Limited Company, under the Companies Act, 2013. This essentially means that there are at least 3 Directors and 7 Shareholders. Further, it’s MoA (Memorandum of Association) must state that the main objective of the proposed company is to promote thriftiness and a habit of savings among it’s members.

  1. What is the process of Ndihi Company Registration?


  1. Apply for DIN & DSC,
  2. Search a unique name in 3 options and get approved by ROC for 1,
  3. Submit of MoA & AoA,
  4. Certificate of Incorporation & CIN,
  5. Take PAN, TAN & Bank Account.
  1. What documents are required for Nidhi Company Registration?


  • Director’s PAN Card copy (ID proof),
  • Passport size photograph of Directors,
  • Copy of address proof of Director,
  • Copy of address proof of company. Property proof (If owned property), Rent agreement (in case of rented property), electricity/water bill, etc. are valid,
  • Landlord NOC (in case of rented property).
  1. What is the limit on deposits in Nidhi Company?

Ans. A Nidhi company is not to accept deposits of more than 20 times of it’s Net Owned Funds (NOF) as per it’s last audited financial statements.

  1. What is the maximum limit of saving bank account?

Ans. The maximum balance in a savings account of one member of a Nidhi company should not be more than Rs.1 lakh. The maximum rate of interest that can be paid on any deposits should not be more than 2% above the rate of interest payable by nationalized banks, on such deposits.

  1. How many directors are required in a Nidhi Company?

Ans. A Nidhi can be incorporated with a minimum of 3 directors and a maximum of 15 Directors.

  1. How to choose name of a Nidhi Company?

Ans. You need to ensure that the name is not similar to any other company which is already registered, whether it is a Private Limited, OPC, LLP or Public limited company. Also, make sure that the name is not a registered trademark taken by someone under the IP Act of India. Also, make sure that the name is not too generic. Otherwise, the ROC may reject it. Moreover, try not to use abbreviations, adjectives.
And it should end with Nidhi Limited.

  1. What are Nidhi rules?

Ans. Nidhi Companies are regulated by Nidhi Rules, 2014. These rules were introduced by the Central Government and contain the regulatory policies for Nidhi company operations.

  1. Who can become member of a Nidhi Company?


  1. An individual person, not a corporate body or trust, can become a member.
  2. Is over 18 years of age.
  1. What are the rules after registration?

Ans. Once Nidhi Company has been registered, it must meet the following requirements within 1-year:
1. Register at least 200 members.
2. Maintain minimum net owned funds (NOF) of Rs. 10 Lakh.
3. Maintain NOF to deposit ratio of 1:20.
4. Of all the outstanding deposits, at least 10% must be unencumbered term deposits.

  1. How long does the registration process take?

Ans. You need to register the company as a limited company under the Companies Act, 2013. It takes approx 30-40 days to register a company.

  1. Is a separate office required?

Ans. No, Nidhi Company can be opened at a residential address or a rented one. You do not need a market place for a registered office address.
You just need:
1. Rent agreement along with the latest rent receipt (if the place is rented).
2. NOC from the Owner.
3. House tax receipts (if the premises are owned)
4. Electricity bill

  1. What restrictions are there for Nidhi Company?


  • A Nidhi Company is prohibited to engage in chit funds, insurance, leasing finance or acquisition of securities issued by any Body Corporate.
  • A Nidhi Company cannot issue preference shares, debentures or any other such instrument.
  • It cannot accept deposits nor lend money, other than it’s members.
  • These companies cannot pay any incentive for mobilizing deposits.
  1. Nidhi Company can take deposits on what basis?


  1. Cannot accept deposits over 20 times of it’s NOF.
  2. The time duration for ”Fixed Deposits” is a minimum of 6 months to a maximum of 60 months.
  3. For Recurring Deposits, it is a minimum of 12 months to a maximum of 60 months.
  4. A Nidhi Company can invest and keep investing, in unencumbered term deposits with a scheduled commercial bank (other than a co-operative bank or a regional rural bank), or in post office deposits, in it’s own name, and the amount must not be less than 10% of the deposits outstanding at the close of business on the last working day of the second preceding month. In some emergency, the limit of 10% can be reduced only after seeking approval of the Regional Director.