Nidhi Company

Nidhis accepts deposits and lends money to member-borrowers against jewellery and property. Over a century, public-spirited men from affluent locals, lawyers, auditors, educationists, and elderly people have advocated Nidhis to encourage thrift.

Local municipalities and panchayats were covered. Some Nidhis with financial and administrative strength opened branches within and outside their revenue district. Mutual benefit is used to pool member savings and lend only to members. Nidhis were prohibited from investing in shares, debentures, or chit funds. These Nidhis solely deal with Members. Individual Members. These companies never accept corporate or trust members.

NIDHI firms are non-banking financial companies that accept deposits and lend to members. The recent NBFC collapses affected NIDHI firms, forcing the government to impose tight prudential standards. The RBI Act and its regulations control NIDHI deposit-taking. The Ministry of Company Affairs can exempt NIDHI companies.

This dual control confuses the RBI Act and Companies Act, 1956 administration. The Committee thought RBI should closely supervise NIDHI businesses since it regulates all NBFCs under the Companies Act.

According to section 406 of the Companies Act 2013, a “Nidhi” or “Mutual Benefit Society” is a corporation declared by the Central Government in the Official Gazette.

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 \scompanies.

In the exercise of powers provided by section 406, read with section 469 of the Companies Act, 2013, Central Government enacted the Nidhi Rules, 2014, which came into force on the 1st day of April 2014. The 2014 Nidhi Rules that apply are-

  • 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 according 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 word ‘Nidhi Limited’ as part of its name.




Eligibility for registering a Nidhi Company


1. To be considered a Nidhi, a company must be publicly traded and have a minimum paid-up equity share capital of Rs. 5 lakh.

2. Nidhi Company must not issue any preferred shares.

3. Preference shares issued by a Nidhi before the effective date of the Companies Act 2013 must be redeemed in line with the provisions of the original share issuance.

4. No Nidhi’s Memorandum of Association may contain any purpose other than encouraging members to practise thrift and saving; it may only accept deposits from and lend money to its members for their mutual benefit.

5. Each “Nidhi” must include the words “Nidhi Limited” as part of its name.


Minimum requirements of a Nidhi Company


Before becoming a Nidhi, each one must make sure that it has the following requirements:

a) 7 members;

b) 3 directors;

c) no minimum capital requirement;

d) no preference shares are permitted to be issued;

e) the company’s sole purpose in accepting deposits from and lending to its members shall be for their mutual benefit.


Within a year of its incorporation, each Nidhi must make sure that it has the following:

(a) at least 200 members;

(b) net owned funds of at least Rs. 10 lakh;

(c) unencumbered term deposits equal to at least 10% of the outstanding deposits; and

(d) a net owned funds to deposits ratio of no more than 1:20.


As a point of clarification, “Net Owned Funds” refers to the total of paid-up equity share capital and free reserves, less accrued losses and intangible assets from the most recent audited balance sheet. Additionally, while computing Net Owned Funds, the sum representing the revenues of issuing preference shares is excluded.

Suppose a Nidhi violates clauses (a) or (d) of subrule (1) above. In that case, it must apply for an extension of time to the Regional Director in Form NDH-2 within 30 days of the end of the first financial year, along with the fee outlined in the Companies (Registration Offices and Fees) Rules, 2014. The Regional Director may review the application and issue orders within thirty days of receiving it. The Regional Director may extend the time to a year from the application receipt date.


Membership of a Nidhi Company


A Nidhi may not accept a corporation or a trust as a member.

2. Each Nidhi is required to make sure that its membership stays above 200 people.

3. No minor shall be permitted to join Nidhi.


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


Branches of Nidhi


1. A Nidhi may only open branches if it has continuously generated net profits after taxes for the previous three fiscal years. A Nidhi is allowed to establish up to three branches there.

2. A Nidhi must seek the prior authorisation of the Regional Director before opening more than three branches within the district or any branch outside the district, and notification of the opening of each branch must be given to the Registrar within 30 days of the opening.

3. Nidhi is not permitted to open any branches, offices, deposit centres, or other locations by any other name outside of the State in which its registered office is located.

4. Nidhi must file a current financial statement and yearly return with the Registrar before opening branches, offices, collection centres, deposit centres, or any other type of facility.

5. A Nidhi may not close a branch unless it a) publishes a notice informing the public of the closure in a newspaper in the local vernacular language at least 30 days before the closure; b) posts a copy of the notice informing the closure of the branch on the Nidhi’s notice board for at least 30 days following the date on which the notice was posted under clause (a) and (c) complies with all of the requirements of clauses


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 in the name of Company. (If rented property)

  6. Copy the latest Electricity/Water/Gas/Telephone bill of the registered office

  7. NOC from the Landlord that he has no objection to using his premises as the Company’s registered office.

Advantages of a Nidhi Company


  1. Liability is Limited

  2. Fewer Regulations

  3. Better Credibility

  4. Better Option for Savings

  5. Easy Access to Public Funds

  6. Ease of Fund

  7. Micro Banking

  8. It acts as a “Better Credit Co-operative Society

  9. Simple Processing

  10.  Easy Registration Process

  11. Single Regulatory Body

  12.  Low Capital Requirement

  13.  Fulfilling the needs of Lower & Middle-income groups

  14. Easier Eligible

  15. No External Involvement

  16. Separate Entity

Limitation of a Nidhi Company


Nidhi Company cannot operate a chit fund, provide hire purchase financing, leasing financing, insurance, or purchase securities issued by any body corporate; issue any financial instrument, including preference shares, debentures, or other loan instruments; or establish a current account with its participants unless it has passed a special resolution in its general meeting and received the Nidhis that meet all conditions can rent locker space to members as long as the rental revenue doesn’t exceed 20% of the fiscal year’s gross income.


Accept deposits from or lend money to any individual who is not one of its members; offer as security any of its members’ deposited assets; accept deposits from any body corporate or lend money to them; engage in any type of partnership agreement when lending or borrowing; publish or cause to be published any advertisement, in any format, for deposit solicitation. The private dissemination of fixed deposit scheme details to Nidhi members with the phrase “for private circulation to members only” should not be considered a solicitation of deposits.


Pay commissions or incentives for collecting member deposits, delivering funds, or authorising loans.


Annual Compliances as per Company Act of Nidhi Company


1. Within 90 days of its incorporation, Nidhi shall file a return of statutory compliances in Form NDH-1 with the Registrar duly certified by a company secretary, chartered accountant, or cost accountant in practice.

2. If the firm does not meet the minimum member criteria, it must apply to the Regional Director in Form NDH-2 for an extension within 90 days of the first financial year. The Regional Director may examine the application and issue orders within 30 days.

3. The business’s auditor must certify annually that the company has complied with all regulations and attach the certificate to the audit report. If the company has not complied, the auditor must specify which rules were not followed.

4. Under Rule 21 of the Nidhi Rules, 2014, every Nidhi company must file a half-yearly return with the Registrar in Form NDH-3 and pay the fee specified in Companies (Registration Offices and Fees) Rules, 2014 within 30 days of the end of each half year, certified by a company secretary, chartered accountant, or cost accountant.

5. Form MGT-7 is the Nidhi Company’s annual return to MCA.

6. Annually submit Form AOC-4 with financial statements and related papers.

7. Like other businesses, Nidhi Company must file its Annual Income Tax Returns by September 30th of the following financial year.

Documents required before filing the strike-off application-


●        Indemnity Bond notarized by Directors

●        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



Company closures are submitted using Form STK 2 (formerly FTE) with government fees of Rs.5000/- and required documents. However, closure cases must be noted. The following steps can close a company:

  1. Pay all Liabilities: Repay all firm liabilities and request a signed No Objection Certificate. Nidhi Company’s several deposits require NOC from all members.

  2. Nidhi Limited Company closure requires 75% consent, a new condition. Company closure requires 75% shareholder/member approval. One director must also be notified to handle company closure.

  3. Prepare Application: After consent is granted, prepare and file the application with ROC.

  4. The firm name is removed if nobody objects.