Nidhi Company Registration
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What is Nidhi Company?

Nidhi is a name given to a business which has been registered in the form of a Nidhi, with the goal of

* Developing an attitude of thrift, and

* Savings among its members

* Receiving deposit from, and

* The lending to its members only to benefit them all It is in accordance to Chapter XXVI of Companies Rules 2014.

They were created to promote the habit of saving and thrift among the members.

The firms that conduct Nidhi business, i.e. taking loans from member and only lending to members can be identified under various names like Nidhi, Permanent Fund, Benefit Funds, Mutual Benefit Funds as well as Mutual Benefit Company.

Nidhi’s are a lot more popular among South India and are highly localized single-office institutions. These are mutual benefit organizations as their activities are only available to members. Membership is limited to members only. The primary source of funding is the contribution of members. The loans are offered to members at affordable rates for home construction or repairs, and are usually secured. The funds gathered by Nidhi’s is not that significant when compared with the formal banking sector.

Because Nidhi’s are part of the NBFC class, RBI is empowered to issue them directions regarding their deposit acceptance practices. In recognition of the fact that these Nidhi’s serve the shareholders of their members only, RBI has exempted the notifying Nidhi’s of the fundamental rules in the RBI Act and other directions applicable to NBFCs.

Nidhi Company comes across a highly appealing option for those looking to start a habit of saving. It allows its customers to access loans at a less cost and with less hassle. It can lead to higher rates of loans and impact those in the middle and lower class the most. To alleviate this burden, there’s a of these mechanisms. This method assists the poor and middle-class individuals who are afflicted by the inability to obtain money or at a reasonable rate. This is called an Nidhi Company.

Concepts of Nidhi Company

The main goal for Nidhi Company is to encourage the habit of saving, and provide financial assistance the members. The company is founded on the idea of mutual benefit and cooperation. It could be extremely beneficial to those in the middle and lower classes as it could yield greater interest and, simultaneously they can get loans with lower interest rates. In India, the Ministry of Corporate  Affairs (MCA) supervises Nidhi Companies, while the RBI is able to regulate them in regards to the acceptance of deposits. They are subject to the Nidhi Rules, 2014.

The main goal for Nidhi Company is to encourage the habit of saving, and provide financial assistance the members. The company is founded on the idea of mutual benefit and cooperation. It could be extremely beneficial to those in the middle and lower classes as it could yield greater interest and, simultaneously they can get loans with lower interest rates. In India, the Ministry of Corporate Affairs (MCA) supervises Nidhi Companies, while the RBI is able to regulate them in regards to the acceptance of deposits. They are subject to the Nidhi Rules, 2014.

Basic Requirements of Nidhi Company

To Incorporate Nidhi Company Basic Requirements are:-             

1Minimum 7 shareholders or members are required.5Minimum 10 equity shares or shares corresponding to Rs 100 should be issued to each deposit holder.
2Minimum 3 Directors are required.6Value Nominal of each equity share issued must not be less than Rs 10 per share.
3A Minimum capital requirement that is 5 lakh needed7DIN (Director Identification Number) for Directors

Nidhi Company Advantage

1.No External Involvement in the Company’s Management.9.Cost-efficient registration.
2.More savings options.10No capital requirement.
3.Nidhi Company Rules is the Single Regulatory Body11Relaxation of numbers of conformity
4.Better alternative to a Credit Co-operative Society12Meeting the financial needs of the middle and lower-income groups.
5.Benefits from the status of a distinct legal entity13A variety of privileges and exemptions are available in the Companies Act, 2013
6.Simple processing.14Simple to handle
7.Access to easy access to the funds of public authorities.15The minimal role of the RBI.
8.Limited liability.16Risk level is low.
  17It is easy to loan money to, or borrow capital from members of the group.

How to Register Nidhi Company ?

Registration- Procedure

S.No.Step NameDescription
1.Obtain DSC and DINThe First step for all the Directors is to obtain DIN (Director Identification Number) and DSC (Digital Signature Certificate).
2.Apply for a Name ApprovalThe shareholders or the Directors are required to apply for a name approval by suggesting three names to the MCA (Ministry of Corporate Affairs). Further, out of these names suggested, the MCA will choose one name for the said company. The suggested name  must be unique and not similar to an already existing company’s name. Moreover, according to rule 8 of the Companies Act, 2013, the approved name will remain valid only for a period of 20 days.
3.Drafting of MOA and AOAAfter Name approval process, the directors need to submit the Application for registration in the form INC- 32, together with the Articles of Association (AOA) and Memorandum of Association (MOA), respectively. Further, it is consider that the documents must state the objective behind incorporating a Nidhi Company.
4.Certificate of IncorporationThis process will take  15-25 days time to get the Certification of Incorporation. Further, this certificate acts as a piece of evidence or proof that the said Company has been incorporated. In future, this certificate also mentions thecompany’s CIN (Company Identification Number).  
5.Opening of a Bank Account and Applying for TAN and PANIn the laststep, the directors need to apply for PAN (Permanent Account Number) and TAN (Tax Deduction Account Number).  Further, shareholder or the members of the company are also required to get a bank account opened just by submitting the Certificate of Incorporation, and the copies MoA, AoA, along with the allotted PAN details to the bank.  

Post Incorporation Requirements of Nidhi Company

Post requirements can be summarized as:

S.No.Step NameDescription
1.At least 200membersAt the end of the 1st year the company should be able to count at least 200 members or shareholders. It is mandatory to provide the complete list of participants within the period of 90 days at the close of each fiscal year using this particular form. If the company cannot be able to count at 200 members, shareholders or members of the company must complete the NDH-2 for the regional director. In submitting this form the Company can extend its financial year provided the form is submitted in the span of 30days beginning at the close of the first year following the its commencement. Furthermore, suppose that the Company is unable to comply with the requirements after the completion of the 2nd financial year. If that happens the company is not able to take deposits until it is in compliance with these rules. The same could result in penalties.
2.NOF should be more than Rs 10 LacsNOF is (Net owned Funds). The company’s NOF must be greater than 10 lakhs. Net Owned Funds is the total of Equity Paid-Up Stock Capital as well as Free Reserves decreased by the intangible assets as well as the cumulative losses appearing on the Last Audited balance sheet.
3.Ratio of the NOF to DepositsPhotographsThe Ratio for the Net Owned Funds to Deposit must be more than 1:20.
4.Unencumbered DepositsUnencumbered deposit must be greater than 10% of the outstanding deposits. This type of business also requires to file a Half-yearly Report to the Office of the Registrar of Companies in Form NDH-3 and be certified again by a practicing CA or CS or CWA in addition to the prescribed charges. Additionally, the Form is due to be filed within 30 days beginning at the end of the half-year.

Post Incorporation Compliances of Nidhi Company

Mandatory Compliance for Nidhi Company

The required compliances for the Nidhi Company are as follows:

  • Form NDH-1 As as per the Form it is required to submit the members’ list within 90 days beginning at the close of each fiscal year on this particular form.
  • Form NDH-2 If you are unable to meet the 200-member target, and is not achieved the requirements of the Company during the initial budget year of the financial year you may be made before the MCA (Ministry of Corporate Affairs) to grant an extension on this Form.
  • Form NDH-3 Other than the one previously mentioned, i.e., NDH-1 Form, half-yearly returns is also required to be filed on Form NDH-3.
  • Annual Return and the ROC– It is mandatory to file annual returns in the MCA via MGT-7. MGT-7.
  • Profit and Loss Statement and the Company’s Balance Sheet– The financial statements as well as other relevant documents have to be filed on an every year, in the form AOC-4.
  • Income Tax Returns (ITR)

It must file annual income tax returns (ITR) on or before the 30th of Septemberfor the relevant the financial year.

General Restrictions on Nidhi Company

Rule 6 provides general restrictions.   According to this Rule no Nidhi shall-

  • Carry on the business of
    • Chit Fund,
    • Hire Purchase Finance,
    • Leasing Finance,
    • Insurance or Acquisition of Securities issued by anybody corporate;
  • Issue
    • Preference Shares,
    • Debentures or
    • Any Other Debt Instrument by any name or in any form whatsoever;
  • Open any Current Account with its members;
  • Acquire another company by;
    • Purchase of securities or
    • Control the composition of the Board of Directors of any other company in any manner whatsoever or
  • Enter into any arrangement for the change of its  management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over Nidhi;
  • Carry on any business other than the business of borrowing or lending in its own name;
  • Accept Deposits from or lend to any person, other than its members;
  • Pledge any of the assets lodged by its members as security;
  • Take Deposits from or lend money to anybody corporate;
  • Enter into any Partnership Arrangement in its borrowing or lending activities;
  • Issue or cause to be issued any advertisement in any form for soliciting deposit;
  • Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or the granting loans.


♦ Nidhi’s that adhere to all of the rules in these rules can offer lockers for rent for its members, with the rent earned from these facilities not exceeding 20 percent of total earnings for the Nidhi at any any time in the course of a financial year.


* A Nidhi is not allowed to nominate a body corporate or trust to be an individual member.

* Unless permitted otherwise by these rules, each Nidhi must make sure that the membership does not get decreased in any one time.

* A minor cannot be considered an associate of Nidhi.

* However, deposits can be accepted on behalf of a minor when they are provided by the legal or natural guardian who is an active part of Nidhi.

Capital share and allocation

Rule 7 states that every Nidhi must issue equity shares at a nominal value at least Rs.10/- per share. This rule does not apply to a company which is declared to be an Nidhi company.

This requirement must not apply to any company that is referred to in the following:

* Any Company that had been declared to be a Nidhi or mutual Benefits in accordance with the provisions of Section 620A(1)of Companies Act, 1956;

* Every company operating in the manner of an Nidhi firm as well as a Mutual benefit society, but has not yet had a formal application made or has been granted notification that it is considered a Nidhi or Mutual Benefit Society in accordance with section 620A(1)of Companies Act, 1956;


* There is no service fee to be charged for the issue of shares.

* Each Nidhi will allot to every deposit holder at 10 , equity shares, or equivalent shares to Rs.100or less.

The holder of a savings or savings accounts as well as the holder of a recurring deposit account must have at minimum have 10 equity shares in the amount of Rs.10/–.

The acceptance of bank deposits:

* A Nidhi will not accept any deposits greater than 20 times the Net Owned Assets, as per its the last year’s audited financial statement.

* Fixed deposits will be approved for at least period of 6 months, and up to 60 months.

Recurring deposits are accepted for a period that is 12 months, and a maximum time that is 60 month.

* In the event of recurring deposits in connection with home loans, the period of the recurring deposits must be equal to the repayment time of the loans provided by Nidhi.

* The maximum balance of the savings deposit account at any point in time that qualifies for interest must not exceed Rs.1,00,000per annum and the interest rate must not exceed 2percent above the rate of interest that is payable to the savings bank account of nationalized banks.

* Interest on fixed and recurring deposits must be paid at a rate of not more than the maximum interest rate set by RBI and the NBFC is able to pay on public deposits.

Every Nidhi shall invest , and continue to invest in term deposits that are unencumbered, with an established commercial or postal office deposit in its name, an amount that is not below 10% of deposits in the account at the time of closing each business day on final work day in the previous month. In the event of unforeseeable commitments, temporary withdrawals may be allowed with prior approval of the Regional Director to allow repayment to depositors under the conditions and time limits that the Regional Director can specify to ensure the restoration of the stipulated limit of 10 percent.


Nidhi will offer the loans to only the members of its organization. The loans granted to members are restricted to these restrictions:

* 2,00,000/- in which the total value of deposits from the members are less than Rs.2 crores

750,000/-, where the total amount of deposits received from its members exceeds Rs.2 crores, but not more than Rs.20 crores

* 12,00,000.00 where the total value of deposits made by its members exceeds Rs.25 crores, but not more than Rs.50 crores

+ 15,00,000. in which the total amount of deposits received from its members is greater than Rs.50 crores.

NOTE: A Nidhi shall offer members of its members only loans for the securities listed below, which include:

* Loans for members will be made against the security of silver, gold and jewelry as well as immovable property.

* The repayment period for such loan must be no more than one calendar year, in silver, gold and other jewelry.

* In the event of an immovable property, the amount of the loan should not surpass 50% of worth of the property that is offered as security. Likewise, the time for repayment of the loan should not exceed 7 years.

* Loans may be made against fixed deposits National Savings Certificates and other Government securities as well as insurance policies.

The rate of interest to be applied to any loan should not exceed 7.5 percent over the highest rate of interest for deposits offered by Nidhi. The calculation is based on the method of reducing balance.

(3) For the purpose of sub-rule (2) (3), the amount of deposits to be determined by analyzing the most recently audited financial statements for the year.


* A Nidhi will not announce a any dividend that exceeds 25% or

* Any higher amount is specifically approved by the Director Regional with reasons that need to be documented in writing, and under the terms and conditions:

A similar amount is transfered to General Reserve;

* There has never been a default in repayment of maturing deposits or interest;

* It has complied with all the rules applicable to Nidhis.


* The Director must be a MEMBER OF Nidhi.

* He is elected for a maximum of 10 , consecutive years, in the Board.

* He is qualified for re-appointment upon two years have passed since ending his term as director.

* In the event that the tenure of one director however has been previously granted to the Central Government, it shall end at the expiration of the prolonged tenure.

* The person who is appointed as Director must meet the requirements in Section 152(4) of the Act and will not be disqualified as stipulated by Section 164 of the Act.


* The term of the Auditor is for five consecutive years.

* No auditor nor auditor of an audit firm should have more than 2 consecutive terms that run for five years.

* The Auditor is qualified for a second appointment following the expiration of two years after the time of completion of his term. “The Auditor for the Company will issue the Company with a certificate every year, stating that the Company is in compliance with all of the requirements contained in the rules. The certificates are to be attached to the audit report. when there is a violation, the auditor shall specify the rules that haven’t been observed.


  • The tenure of Auditor is five consecutive years.
  • No auditor or audit firm as auditor shall be appointed for more than two terms of five consecutive years. 
  • The auditor shall be eligible for subsequent appointment after the expiration of two years from the completion of his term.
  • The Auditor of the company shall furnish a Certificate every year to the effect that the company has complied with all the provision contained in the rules and such certificates shall be annexed to the audit report and in case of non compliance he shall specifically state the rules which have not been complied with.


* A Nidhi can start branches only if it consistently earned net profit after tax in the previous three financial years.

* The Company can operate up to three branches in the district.

* If the company plans opening more than three branches inside the district, or any branch that is outside the district, it must seek permission from the Regional Director. In addition, an announcement must be provided to the Registrar regarding the opening of each branch in the first 30 days following the opening.

* Nidhi is not allowed to establish branches, collection centers or offices or deposit centres or any other name known outside of the State in which it’s registered office.

* Additional branches, offices, collection centers or deposit centers must be established unless financial reports and annual statements are submitted to the Registrar.

Close of Branch:

A Nidhi will not shut down any branch in the event of:

* It makes advertisements in a newspaper in the vernacular language , and it continues to operate at least 30 calendar days prior to the closure date.

• Informing the public of the closure and placing an advertisement or a notification of that the branch is closing on the noticeboard of Nidhi within at most 30 calendar days from the date the advertisement was made and

* Notifies the Registrar no later than 30 days after closing.

The Difference between Nidhi Company with NBFC

Below are the reasons Nidhi Company is different from NBFCsThe reasons below are the reason why Nidhi Company is different from NBFCs

  • Nidhi Company cannot conduct any other kind of business. A Nidhi Company cannot undertake any other type of activity or transaction beyond those specified under the Nidhi Scheme. Nidhi Company is distinct from NBFCs in that they don’t have the right to purchase securities in the form of shares or stocks that the company has issued.

Furthermore, Nidhi Company cannot conduct an chit fund or hire leasing business.

  • NBFC requires the prior approval from RBI prior to the start of business. –Nidhi Company doesn’t need RBI approval prior to launching the lending process.

The problem is that NBFC needs the approval by the RBI prior to launching the business.

  • Restriction on the issuance of preference Share Capital Preference Share Capital A Nidhi Company shall not issue Preference Share Capital to raise funds. Nidhi Companies accept money in the form of deposits, not through any other method.

In reality, NBFC can issue Preference Share either Debenture or Capital.

  • Open of Current Account Nidhi companies are not permitted under the law of government opening an account with a current balance. Nidhi Company is treated as an organization for mutual benefit, and is not considered as a commercial business.

NBFCs need to open an Account Current.

  • Restrictions to open a branch prior to an arbitrary time frame – Nidhi companies are not able to establish branches in India. The company earns a profit over a period of 3 years. This is among the compulsory conditions that cannot be altered even if you’ve sought approval from the Registrar of Companies (ROC).

There isn’t an obligation in the case of NBFC.

  • Nidhi Companies cannot pay any brokerage. For the purpose of mobilizing deposits made by members, Nidhi Companies cannot pay any incentive or brokerage.
  • Technical and Investment Parameters NBFCs must meet all technical and investment specifications. The procedure for registering an NBFC is extremely long in comparison with Nidhi Company registration because there is a lower obligation to comply than NBFC.
  • Nidhi Company Nidhi Company is a limited company within the State The Nidhi Company is a State-owned company. The operation that Nidhi Company is limited within the State. Nidhi company is restricted to that State, i.e., the Nidhi company is a trademark within the state. However, it’s not for NBFC.
  • Limitation to enter into Partnership Partnership The Nidhi Company cannot enter into an Partnership to borrow or lend reasons. But, there isn’t limitation in the case of NBFC.
  • Nidhi Company cannot add an Body corporate as a member. in the form of a member In this case, Nidhi Company, there is an restriction on Membership. The Nidhi Company cannot include Body corporate as a member. Therefore, it is not able to accept deposits from these institutions.

Nidhi Company Registration

A Nidhi Company is a Company which carries on the business of accepting deposits and lending the same on demand. Nidhi Company is similar to NBFC but the only basic difference between the two is that Nidhi Companies accept deposits only from its members. The main aim of these companies is to work for the mutual benefit of its members. These companies are not entitled to carry on the business of Hire Purchase Financing, Insurance, Chit Funds and Acquisition of securities or Issue of any Debt Instruments.

A minimum of three directors and seven shareholders are needed for incorporating a Nidhi Company.

No, a minor is not allowed to become director of a Nidhi Company. Only a person who is a minimum of 18 years old can become the Director of a Nidhi Company.

No, there is no upper limit prescribed for the maximum number of members. However, it is mandatory for a Nidhi Company must have a minimum of two hundred members by the end of the 1st financial year.

No, all the financial transactions have to be made only between the shareholders of the company.

No, Nidhi Company is not allowed to do microfinance business in India. These are because micro finance is a completely different set of business for an NBFC and require more capital to do the same. Hence, Nidhi Company cannot engage itself into micro finance business. Further, since Nidhi Company raise fund from deposits and hence, if it passes the same to member without any security, then there will be great chances of customer default which will ultimately results into bankruptcy of the Nidhi Company.

A Nidhi Company can open up to 3 branches after three years of continuous profit running of the business. Further, these three branches can be opened within the district only. Further, to open any branch outside the district, you will require the Regional Director (RD) permission. Also, a Nidhi Company cannot open a branch outside the state.

Yes, the Deposits with such companies are safe and secure because the Ministry of Corporate Affairs and Reserve Bank of India has framed rules and regulations to ensure the safety and security of Deposits. And the Nidhi Company compulsorily abide by the rules of Central Government.

Any person who is above 18 years of age as per the standard age proof can become a member of the Nidhi Companies. The person desirous of becoming a member should have valid ID Proof and Address Proof.

Nidhi can provide loans to its members only after the members have given/ provided some securities like gold, silver jewelry or any type of financial securities against the loan.

Yes, it is necessary to use the word “Nidhi Limited” in the name of the company. However, the term “Mutual Benefit” can also be used.

The regulations passed by the Ministry of Corporate Affairs and the provision of Nidhi Rules, 2014 act as the regulating authority for Nidhi Company.

A Certificate of Incorporation has lifetime validity, or till the time the company’s name is not struck off by the ROC (Registrar of Companies).

No, Nidhi Company is not qualified to issue unsecured loans. However, it can issue Secured Loans to its shareholders or members.

No, a person cannot borrow again from the Nidhi Company if he has earlier defaulted in a loan.

No, a Nidhi Company is not allowed to operate outside the state in which it is registered.

No, the profits earned from a Nidhi Company cannot be invested in any other business.

A minimum of 6 months and a maximum of 60 months period is prescribed for fixed deposits in a Nidhi Company.

A Nidhi Company can accept deposits only from its Registered Members.

A minimum of 12 months and a maximum of 60 months period is prescribed for recurring deposits in a Nidhi Company.

No, Nidhi Companies are exempted from the core NBFC provisions of the Reserve Bank of India.

A Nidhi Company is not regulated and governed by the provisions of RBI. Moreover, Nidhi Company Registration requires a much smaller amount of capital than Rs 2 Crore paid-up capital requirement for NBFCs.

A Nidhi Company is not regulated and governed by the provisions of RBI. Moreover, Nidhi Company Registration requires a much smaller amount of capital than Rs 2 Crore paid-up capital requirement for NBFCs.

No, a Nidhi Company cannot purchase securities and shares from any other organization.

No, a Nidhi Company cannot purchase securities and shares from any other organization.

No, a Nidhi Company is not allowed to carry out any activity other than Lending and Borrowing.

A director of Nidhi Company can hold their office for 10 consecutive years. However, he is eligible for re-appointment only after the expiry of 2 years, starting from the cessation of his term.

Nidhi Company cannot accept deposits exceeding the limit of twenty times its NOF (Net Owned Funds).

A Nidhi Company is allowed to open only three branches within a district. However, to open more than three branches, the said Company is must seek prior approval of the RD (Regional Director) for every additional branch.

A Director is firstly required to be a member of the said Company, and then, he must comply with the requirements prescribed under Section 152(4) of the Companies Act, 2013.

No, a Body Corporate is not allowed to be admitted as a member or shareholder of a Nidhi Company.

A Nidhi company must be incorporated under the provisions of the Companies Act, 2013, and shall acquire the status of a Public Limited Company.

No, such rules have been prescribed banning a salaried person from becoming a director of a Nidhi Company. However, the employment agreement of the said person may place some restrictions on him or herein doing so.

A Nidhi company cannot be converted into NBFC.

No, Nidhi Company cannot give a vehicle loan

A Nidhi Company is a company that carries on the business of accepting deposits and lending the same on demand. Nidhi Company is similar to NBFC, but the only basic difference is that Nidhi Companies accept deposits only from its members.

Nidhi can deal only in secured loans. Thus it can give loans against the securities mentioned in the law.

The term NOF is the acronym form for the Net Owned Funds. Further, NOF or the Net Owned Fund = Aggregate Paid up share capital + Free Reserves – Accumulated losses (Deferred Revenue Expenditure), and Other Intangible Assets appearing in the Last Audited Balance Sheet.