In Companies Act, 2013, there are various restrictions on directors and shareholders to accept and give away the money to the Company. Thereby, the Ministry of Corporate Affairs came up with the concept of Nidhi Companies whereby unlike Non Banking Financial Company (NBFCs), these Companies does not require registration certificate by Reserve Bank of India (RBI) to operate. Literally, the word “Nidhi” means “treasure”. In this article, we shall discuss about the various aspect of a Nidhi Company.

As per the provisions of the section 406(1) of the Companies Act, 2013, “Nidhi” means a “company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit”. Therefore, we can say that a person who along with other persons wants to start a Company such that to collect money among them and give away that money as loans along with interest to the members only from which the money was collected can opt for incorporation of a Nidhi Company.


  • Easy formation
  • Cost efficient registration
  • No RBI regulations
  • More certainty in Nidhi Company
  • Less level of risk


  • Should be a public Company with minimum paid up capital of Rs. 5 lacs.
  • Shall not issue preference shares.
  • Shall have last words “Nidhi Limited” as a part of its name.
  • Minimum 3 Directors which shall mandatorily be member of Nidhi Company.
  • Minimum 7 shareholders.


Within a period of one year of incorporation, the Nidhi Company has to ensure the following compliances:

  • Minimum 200 members
  • Net owned funds (“NOF”) of at least Rs. 10 lakhs. (Net owned fund means the aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet)
  • Ratio of NOF to deposits of not more than 1:20.
  • Unencumbered term deposits of not less than 10% of the outstanding deposits (shall be discussed later in this article).


A Nidhi Company shall not: 

  • carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities by any body corporate.
  • issue preference shares or debt instruments.
  • open any current account with its members.
  • acquire any Company by way of purchase of securities or controlling the composition of Directors unless approval has been taken from the Regional Director.
  • carry on any business other than business of borrowing and lending its own name.
  • accept deposits from and lend to anyone else, apart from its members.
  • pledge any of the assets lodged by its members as security
  • take deposits from or lend money to any body corporate
  • enter into any partnership arrangement in its borrowing or lending activities
  • issue advertisement for soliciting the deposit.
  • pay any brokerage or incentive for mobilising deposits from members or for granting loans.
  • levy service charge for issue of its shares or issue less than 10 share per deposit holder.
  • grant loans to members exceeding the ceiling as mentioned in the Nidhi Rules, 2014.
  • charge rate of interest exceeding 7.5%.
  • not declare dividend exceeding twenty five per cent.


A Company shall accept deposits only on compliance with the following conditions: 

  • Shall not accept deposits exceeding twenty times of its NOF.
  • Fixed Deposits shall be accepted for a period of minimum 6 months to maximum 60 months.
  • Recurring Deposits shall be accepted for a period of minimum 12 months to maximum 60 months.
  • Unnumbered Term Deposits: Every Nidhi Company shall invest and continue to keep invested, in unencumbered term deposits with a scheduled commercial bank (other than a co-operative bank or a regional rural bank), or post office deposits in its own name an amount which shall not be less than ten per cent. of the deposits outstanding at the close of business on the last working day of the second preceding month. Further, in case of any unforeseen emergency, the limit of 10% can be withdrawn only after prior approval of Regional Director.


  • The Director shall not hold office for a term up to ten consecutive years.
  • Shall be eligible for re-appointment only after the expiry of two years from the date of expiry of ten years period.


The Nidhi Company shall have to adhere to all the provisions and sections as applicable to a Public Company except the provisions that have been specifically exempted for Nidhi Company. Further, instead of Form AOC-4 and MGT-7 that we file for normal Companies, following forms shall have to filed for Nidhi Companies:

  • NDH-1: Within 90 days of closure of first financial year after its incorporation certified by a company secretary in practice or a chartered accountant in practice or a cost accountant in practice certifying that the Nidhi Company has duly complied with its post incorporation compliances.
  • NDH-3: Half yearly return shall have to be filed within 30 days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice.
  • Auditors Certificate that the Company has requisite complied with all the provisions of the Act.

Further, the Income Tax provisions w.r.t. a Nidhi Company and a normal Company are the same.

{The author is a Company Secretary in Practice and can be reached at (M) 9999952595 and (E)}

Author Bio

Qualification: CS
Company: Kajal Goyal and Associates
Location: Delhi, New Delhi, IN
Member Since: 11 Jun 2018 | Total Posts: 46
KAJAL GOYAL AND ASSOCIATES, is a Company Secretary proprietorship firm, offering its expertise and one stop solutions for all Corporate compliance requirements to the clients with a strong emphasis on ethics and ‘being on toes’. Capable delivering services related to Companies Act, FEMA, Re View Full Profile

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