Capital Needed to Start a Nidhi Company

The nidhi company capital requirement is the first number every promoter asks about, and it is really two numbers: the paid-up capital you need to incorporate, and the net owned funds you need to get the Central Government declaration later. Plan for the second one from day one, because that is where most new Nidhis get stuck.

In this guide

• Minimum paid-up capital at incorporation
• Net owned funds: the Rs 20 lakh test
• How capital caps your deposits
• Money you need beyond the share capital
• What about borrowing or outside money?
• FAQs

Minimum paid-up capital at incorporation

A Nidhi must be a public company, and its minimum paid-up equity share capital is Rs 10 lakh. It used to be Rs 5 lakh. The 2022 amendment (GSR 301(E), 19 April 2022) doubled it, and Nidhis that already existed were given 18 months to catch up.

Two details trip people up. First, the money must be paid up, not just authorised. If you are unsure about the difference, our note on authorised vs paid-up capital covers it. Second, it must be equity. A Nidhi cannot issue preference shares, so there is no way to raise this part through them.

You also need at least 7 members and 3 directors at the start. The full incorporation sequence is laid out in our Nidhi company registration guide.

Net owned funds: the Rs 20 lakh test

Within 120 days of incorporation you apply for the declaration on Form NDH-4. The application needs at least 200 members and net owned funds (NOF) of at least Rs 20 lakh. Before 2022 the NOF figure was Rs 10 lakh.

Read that against the Rs 10 lakh minimum paid-up capital and the gap is obvious. Capital at the bare minimum does not clear the NDH-4 test. Either you bring in more equity, or you show enough free reserves to reach Rs 20 lakh. NOF is broadly what the company owns outright, meaning equity plus free reserves less accumulated losses, so check the Rule 2 definition with your CA before you rely on a particular figure. Our post on net owned fund goes into the calculation, though note it still quotes the older Rs 10 lakh figure for Nidhi.

If the declaration is not granted, the company cannot accept deposits from or lend to members. The steps and common reasons for rejection are in our NDH-4 guide.

How capital caps your deposits

Capital decides how big the Nidhi can grow. The Rules say NOF to deposits cannot exceed 1:20, so deposits can be at most twenty times NOF. A Nidhi must also keep unencumbered term deposits of at least 10% of outstanding deposits, held with a scheduled commercial bank in the Nidhi’s own name.

NOF	Deposit ceiling at 1:20	10% unencumbered term deposit
Rs 20 lakh	Rs 4 crore	Rs 40 lakh
Rs 30 lakh	Rs 6 crore	Rs 60 lakh
Rs 50 lakh	Rs 10 crore	Rs 1 crore

The last column catches people off guard. A tenth of what members deposit sits locked in a bank, so it cannot be lent out. Work it into your cash plan before you promise members a lending rate.

Money you need beyond the share capital

Share capital is not your whole budget. Set aside funds for:

• Government and professional charges for incorporation and NDH-4 (these change, so ask us for a quote rather than relying on an old figure)
• Registered office set-up and staff for the first months
• Accounting and Nidhi management software for members, deposits and loans
• Statutory audit and the yearly filings that follow
• Running costs until interest income starts covering them

Our cost guide lists what the charges cover without quoting numbers that go out of date.

What about borrowing or outside money?

People searching for “nidhi finance” often assume a Nidhi can raise money like any lender. It cannot. Its funds are member capital and member deposits. After the 2022 changes a Nidhi may borrow from banks and financial institutions to lend to members, but it still cannot take deposits from non-members, advertise to solicit deposits or pay brokerage for them. Treat borrowing as a top-up, never as a substitute for owned funds.

Related reading

• Nidhi Company Registration in India: Process, Documents, Cost and Timeline
• Nidhi Company Registration Cost and Charges
• Net Owned Fund (NOF)
• Authorised vs Paid-Up Capital
• NDH-4 for a Nidhi Company: Steps and Rejection Reasons

Need help with your Nidhi company? See our Nidhi company registration service, call +91 93117 95484, or write to mail@taxhint.in.

FAQs

What is the minimum capital to start a Nidhi company?

Rs 10 lakh of paid-up equity share capital, raised from Rs 5 lakh by the 2022 amendment. Remember that NDH-4 later asks for NOF of Rs 20 lakh, so many promoters start with more.

Is Rs 10 lakh enough to get the NDH-4 declaration?

Usually not on its own. The application needs NOF of at least Rs 20 lakh and 200 members, so you need additional equity or free reserves to reach that level.

Can a Nidhi issue preference shares to raise capital?

No. A Nidhi can only have equity share capital. Preference shares are not allowed.

How much can a Nidhi take as deposits against its capital?

Deposits can go up to twenty times NOF under the 1:20 ratio. With NOF of Rs 20 lakh that is Rs 4 crore, subject to the 10% unencumbered term deposit requirement. Please confirm the current Rules before planning around these limits.

More in this Nidhi series