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October 7, 2026 · Guides

Unencumbered Term Deposits and Interest Limits for Nidhi

Two numbers control a Nidhi’s day-to-day money: how much interest it may pay and charge, and how much it must keep aside in unencumbered term deposits. The nidhi company interest rate rules are short, but breaching them is easy when rates move and nobody revisits the rate card. Here is what the Rules say, in a form you can put in front of your accounts team. As always, confirm the current text before you act.

In this guide

Interest on deposits

A Nidhi cannot pay what it likes. The Rules cap the interest on deposits at the ceiling prescribed by the RBI for NBFC deposits. Because that ceiling is set outside the Nidhi Rules, check the current figure whenever you revise your rates, instead of copying last year’s rate card. The deposit types and tenures themselves are in our post on deposit rules for Nidhi companies.

Interest on loans

Loan interest may not be more than 7.5% above the highest rate the Nidhi pays on deposits, and it must be charged on a reducing balance. The deposit rate therefore sets the loan ceiling indirectly: raise your top deposit rate and the permitted loan rate moves up with it; cut it and the room shrinks.

ItemRule as we read it
Deposit interestWithin the RBI ceiling for NBFC deposits
Loan interestHighest deposit rate plus not more than 7.5%
MethodReducing balance

Our loan rules for Nidhi companies post shows the security and loan limits that go with this.

The 10% unencumbered term deposit

Under Rule 14, a Nidhi must hold unencumbered term deposits of at least 10% of its outstanding deposits. Three words in that sentence do the work.

  • Unencumbered: not pledged, not lien-marked, not used as security for a borrowing.
  • Term deposits: fixed deposits, and not the balance in a savings account.
  • With a scheduled commercial bank, in the name of the Nidhi itself.

If outstanding deposits are Rs 10 crore, the Nidhi needs at least Rs 1 crore sitting in such term deposits. As deposits grow through the year, this floor grows with them.

Staying inside the limits

A short monthly routine does most of the work.

  • Compare the rate card with the RBI ceiling each time you revise rates.
  • Recompute the 10% requirement on month-end deposits and top up the term deposit when needed.
  • Keep the bank certificates and FD receipts in the Nidhi’s name, ready for the auditor.
  • Keep the 1:20 ratio in view too; it is covered with net owned funds in our NOF post.

If you slip

Rule 24 provides a fine of up to Rs 5,000 plus up to Rs 500 per day for continuing default. Beyond the fine, a Nidhi that does not meet its conditions can have trouble with its returns and with the Registrar. The overall picture of the regime is in the Nidhi Act and Nidhi Rules 2014 guide, and the question of who regulates what is in whether RBI regulates a Nidhi. Check current due dates and rules on the MCA portal.

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 interest limit on Nidhi deposits?

The ceiling follows the RBI-prescribed limit for NBFC deposits. Look up the current figure before you set or change your rates.

How much interest can a Nidhi charge on loans?

No more than 7.5% above its highest deposit rate, charged on a reducing balance.

What is the unencumbered term deposit requirement for a Nidhi?

At least 10% of outstanding deposits, held as term deposits with a scheduled commercial bank in the Nidhi’s own name and free of any charge.

What happens if a Nidhi breaches these rules?

Rule 24 allows a fine of up to Rs 5,000 plus up to Rs 500 for each day the default continues.

More in this Nidhi series