October 7, 2026 · Guides

Nidhi Company vs Microfinance Company

A Nidhi microfinance company is a phrase people use for any small-ticket lender, but a Nidhi and a microfinance company are separate things. A Nidhi lends only to its own members, and a microfinance company lends to low-income borrowers under the RBI’s rules. This post compares them so you can match the structure to the borrowers you want to serve.

In this guide

Two different models
Side by side
What limits a Nidhi when it lends small
Which to choose
A word on naming
FAQs

Two different models

A Nidhi is a mutual benefit company. Its members are its depositors and its borrowers, and the law treats it as a thrift society run as a public company under Section 406 of the Companies Act, 2013. See Nidhi company registration for how one is formed.

A microfinance company lends small sums, usually without heavy collateral, to low-income households, often women in groups. Those that lend as a business are generally NBFCs and sit under the RBI. We describe this only in outline; check the RBI’s current microfinance directions before you design a product.

Side by side

Point	Nidhi company	Microfinance company
Borrowers	Members only	Low-income borrowers, as the RBI framework allows
Regulator	MCA	RBI for NBFC-type lenders
Approval	NDH-4 declaration	RBI registration
Funding	Member deposits, plus bank borrowing after 2022	Equity, bank loans and other funding; deposits only where RBI permits
Typical security	Gold, deposits, property, securities, policies	Often group guarantee or unsecured small loans
Loan cap	Per the Nidhi Rules, scaling with deposits	Per RBI norms for the category

Check the current rules before relying on this table.

What limits a Nidhi when it lends small

A Nidhi’s loan ceiling per member rises with its deposit base. As we read Rules 15 and 16, it is up to Rs 2 lakh where deposits are under Rs 2 crore, Rs 7.5 lakh for Rs 2 to 20 crore, Rs 12 lakh for Rs 20 to 50 crore and Rs 15 lakh above Rs 50 crore. Confirm the current text before you fix your loan policy.

Interest on loans may not exceed 7.5 percent above the highest deposit rate and is charged on a reducing balance. Deposits come only from members. For the full lending framework, read Nidhi company vs NBFC.

Which to choose

Choose a Nidhi when you can gather a defined member group, such as a locality or a trade circle, and your capital will come mostly from their deposits. Choose the microfinance route when your borrowers are outside such a group, when you plan to raise outside funding, or when you want to reach many households quickly.

Nidhi: a lower entry bar on paper at Rs 10 lakh paid-up capital, but 200 members and Rs 20 lakh net owned funds by NDH-4.
Microfinance: RBI registration and its capital and governance norms.

A third structure, where profit is not the goal, is covered in Nidhi company vs Section 8 company. Savings groups starting with chits should also read Nidhi company vs chit fund.

A word on naming

Do not describe a Nidhi to the public as a microfinance company or an NBFC. The company’s name must end with “Nidhi Limited”, and misdescribing it can mislead depositors. If you are unsure which label fits your plan, our guide to Nidhi finance company registration sets out the registration stages, and you can ask us for a quote on the work.

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

FAQs

Is a Nidhi company a microfinance company?

No. A Nidhi lends only to its own members under the Nidhi Rules, while a microfinance company is a lender serving low-income borrowers under RBI norms.

Can a Nidhi give microfinance loans?

Yes, small loans to members are possible, within the per-member caps in the Nidhi Rules. Lending to non-members is not allowed.

Does a Nidhi microfinance company need RBI registration?

A Nidhi does not register with the RBI. A microfinance company that lends as an NBFC does.

What is the maximum loan a Nidhi can give?

As we read the Rules, up to Rs 2 lakh per member while deposits are under Rs 2 crore, rising with deposit size. Confirm the current text before you set limits.