This article has been written by Rupsa Chattopadhyay pursuing Certificate Course in Introduction to Legal Drafting: Contracts, Petitions, Opinions & Articles and edited by Shashwat Kaushik.

This article has been published by Sneha Mahawar.


According to the Nidhi Rules, 2014, the term “Nidhi” means a company that has been incorporated with the objective of encouraging the habit of thrift and savings among members. It involves accepting deposits as well as lending to members. This is done with the objective of mutual benefit.

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To be a Nidhi company, the Central Government has to notify the corporation as a “mutual benefit society.” The company is notified as such when their transactions are restricted to shareholders and members. A Nidhi company is not compelled to receive a licence from the Reserve Bank of India (RBI). Hence, it is not difficult to form. A Nidhi company has to be registered as a public company. It needs to have “Nidhi Limited” in the last part of its name.

What are Nidhi companies

Nidhi companies form an important concept under company law. A Nidhi Company is a company that falls under the non-banking sector. Nidhi is a type of non-banking financial company (NBFC) in India. They are cooperative societies that provide loans to their members. Nidhi companies are not allowed to accept deposits from the public.

To become a Nidhi company, an organisation must have at least 10 members and a minimum paid-up capital of INR 10 lakh. The organisation must also have a board of directors and a set of bylaws. Nidhi companies are regulated by the Reserve Bank of India (RBI).

Nidhi companies offer a variety of financial products and services to their members, including loans, deposits, and insurance. Loans are typically used for business purposes or to meet personal expenses. Deposits are offered as a way for members to save money. Insurance products are offered to protect members from financial risks.

Nidhi companies are a popular choice for small businesses and individuals who need access to affordable financial products and services. They are also a good option for people who want to save money or protect themselves from financial risks.

Legal framework and regulatory bodies governing the functioning of Nidhi Companies

Nidhi Company is seen under Section 406 of the Companies Act, 2013. This provision is to be read with the Nidhi Rules 2014 and Amendment Rules 2022

The main venture of such companies is lending and borrowing money among members. They fall into the non-banking financial sector. Such companies are regulated by the Minister of Corporate Affairs (MCA). Nidhi companies fall under the category of Non Banking Financial Companies (NBFC). Normally, NBFCs are completely regulated by the Reserve Bank of India (RBI). Unlike other NBFCs, these companies are only partially regulated by the Reserve Bank of India (RBI). This regulation relates to deposit acceptance activities.

Composition and membership of Nidhi company

A Nidhi company can be incorporated when there are a minimum of seven members. Out of the 7 members, 3  must be the directors of a company.

The following are the membership rules of a Nidhi company:

  • A body corporate or trust cannot be admitted as a member
  • A minor cannot obtain membership in a Nidhi company. Deposits may be admitted on behalf of the minor in their name. This is done only if they are made by a natural or legal guardian who is a member of a Nidhi company

Within a year of its incorporation, a Nidhi company needs to ensure that its membership comprises a minimum of 200 members.

Features of Nidhi company

The following are the characteristics of a Nidhi company:-

  • A Nidhi company facilitates savings in the middle and lower class
  • Term deposits are accepted for occasional returns in case of Nidhi companies
  • A loan is provided against collateral in case of Nidhi companies
  • Nidhi companies become an easy source of loan
  • Saving and loans are given with minimal documentation
  • The rigid membership structure of Nidhi companies becomes a secured means of investment.

Object of Nidhi companies

The main objects of Nidhi companies are as follows:-

  • The acceptance of Nidhi deposits and loans that may be applicable to members only
  • Grant loans to the members at a reasonable rate of interest on certain immovable properties, on deposits with company and valuable metal as well as jewellery
  • Encourage the members to save money
  • Restrict the business to only the members, as well as transact with only them

Benefits of a Nidhi company

The following are the benefits of a Nidhi company:-

  1. No third party: There is no third party member involved. One is able to manage the financial aspects more easily. The members can help each other. But there are certain guidelines issued by the RBI that are to be followed
  2. No need for a licence: A Nidhi company is to be registered as a public company and does not require any licence from the Reserve Bank of India.
  3. Limited liability owned: The liabilities of the members of a company extend only to their share capital.
  4. Low credit rate: Loans can be taken at low credit rates. The money can be invested in income sources that are very profitable. 
  5. Transferable ownership: The ownership of a Nidhi company is held in shares. Ownership is not dependent on people. 
  6. Funding venture: Raising funds from Nidhi Company members is easier as all members follow a limited liability policy where the primary goal is to create a policy of savings.
  7. Easy to manage: The financial processes at Nidhi Company can be followed easily. Simply put, one has to follow the guidelines and ensure that they lend or narrow accordingly. The government becomes lenient about the minimum equity shares, credit rates or more.
  8. Savings: When one becomes a member of a Nidhi company, they will be determined to save income for beneficial investments. The members will be motivated to increase their savings. This will enable them to invest and lend their money as well.

Post incorporation requirements of Nidhi company 

The following compliances are required to be met by a Nidhi company within a year of its incorporation:-

  • The minimum number of members has to be 200.
  • The Net Owned Funds(NOFs)  should be Rs. 20 lakhs.
  • The minimum equity share capital of Rs. 5 lakhs must be present.
  • A Nidhi company has to issue shares for a minimum value of Rs. 10. However, it must not levy an added service charge.
  • The maximum balance in a savings account has to be Rs. 1 lakh.
  • The Net Owned Funds (NOFs) have to be in a ratio of at most 1:20.
  • Unencumbered term deposits should be at least 10% of outstanding deposits mentioned in Rule 14 of Nidhi Rules and Amended Rules of 2022.

Process of registration of a Nidhi company

The following are the steps involved in the registration of a Nidhi company:-

  1. One needs to file an application at the RUN facility in the Ministry of Corporate Affairs (MCA) Portal. This helps to check the availability of names.
  2. One needs to obtain Class 2 Digital Signature Certificate (DSC) of all proposed directors.
  3. Then the person who is applying needs to fill out and submit the SPICe 32 Form in the form and manner prescribed. 
  4. One has to annex the said form with these:
  • Articles of Association (AoA);
  • Memorandum of Association (MoA);
  • PAN Card;
  • ID Proof;
  • Address Proof of the First Directors;
  • Consent of the proposed Directors to act as Directors in the form DIR-2;
  • Self Declaration in the form INC-9;
  • Address Proof of the Registered Office of the Company;
  • No Objection Certificate from the Owner of the Premises of the Office of the company; and
  • Latest Utility Bills of the Registered Office;

After these steps are followed, an incorporation certificate is granted by the Ministry of Corporate Affairs (MCA) before 15-20 days pass. Such a certificate is conclusive evidence that all the requirements have been complied with.

Restrictions applicable to the NIDHI company

The following are the restrictions that  are applicable to Nidhi companies:-

  1. Nidhi companies should only conduct businesses related to borrowing and lending in their name. Nidhi companies cannot carry any other businesses in their names
  2. Nidhi companies cannot carry on businesses such as chit funds.
  3. Nidhi companies should not issue preference shares, debentures or any other debt instrument in any manner, name or form.
  4. Nidhi companies should not open current accounts with their members.
  5. The Nidhi companies should not obtain any other company’s securities unless special resolution and Regional Director approval are obtained at the correct  time.
  6. A Nidhi company should not control the composition of the Board of Directors unless it receives special resolution and Regional Director approval for the same.
  7. A Nidhi company cannot be involved in the following:
  • Hiring of purchase finance.
  • Leasing finance, insurance or acquisition of securities issued by any body corporate.

Annual statutory compliance

The following forms need to be filed on an annual basis:


This form has to be filed on a half yearly basis with the Registrar of Companies. This provides information about the members with deposits, loans and reserves every six months. This form has to be certified by practising Chartered Accountants, Company Secretary or Certified Management Accountants.


This is an annual financial statement form. It has to be filed within 30 days of holding the annual general meeting with the Registrar of Companies.


This is an annual return form. It has to be filed within 60 days of an annual general meeting or the due date of the annual general meeting to be filed with the Registrar of Companies.


This form has to be filed on September 30 of every year with the Registrar of Companies.


This form is for disclosure of interest by the director to the company. This has to be done when the first board meeting is held in each financial year.


This form is for the disclosure of non-qualifications to the company made by the director. This is done at the first board meeting in every financial year.


This form is submitted to the  Registrar of Companies for the reappointment of an auditor or the casual vacancy of an auditor.


This form is submitted to the Registrar of Companies for the disclosure of Significant Beneficial Owner within 30 days of the receipt of BEN-1 from the shareholder.


This form was submitted to the Registrar of Companies for the Pending Payment to Vendor in the case of MSME. This is a return to be made every 6 months. The following are the due dates:

  1. For the filing done from April 1 to September 30, the return is to be made on October 30.
  2. For the filing done from October 1 to March 31, the filing is to be done on April 30.

Loans on NIDHI companies

The following loans can be given in Nidhi companies:-

  • A loan of Rs 2 lakhs may be given for a deposit of Rs 2 crores
  • A loan in the amount of Rs 7.5 lakhs may be given for a deposit in the range of Rs 2 to Rs 20 crores
  • An amount of Rs 12 lakhs may be given for a deposit in the range of Rs 20 to Rs 50 crores
  • A loan of Rs 15 lakhs may be given if the deposit is more than Rs 50 crores


Nidhi companies are a special feature of the Companies Act, 2013.  Nidhi companies have been introduced to encourage savings among the members of the Nidhi company. Nidhi companies are not difficult to incorporate. Nidhi companies have several advantages. In this article, various aspects concerning a Nidhi company have been discussed.


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