Nidhi Companies, governed under Section 406 of the Companies Act, 2013, are mutual benefit societies aimed at encouraging savings and thrift among members. Existing companies incorporated under the Companies Act, 1956/2013 must apply for declaration or update of status through NDH-4 forms within specified timelines. Newly incorporated Nidhis must apply within 120 days post-incorporation, meeting minimum Net Owned Funds (NOF) and member requirements. Post-incorporation compliance mandates at least 200 members, a NOF of ₹20 lakh, a NOF-to-deposit ratio of 1:20, and unencumbered term deposits of at least 10% of outstanding deposits.
Membership is limited to individuals; minors’ deposits may be accepted via guardians. Deposits can only be accepted from members, with fixed and recurring deposit limits, and interest rates capped per RBI norms. Nidhi Companies can grant secured loans only to members, subject to deposit and NOF limits, against collateral like gold, immovable property, FDs, or NSCs. Branch expansion is allowed after three years of profitability, with up to three branches per district without approval; additional branches require Regional Director approval.
Prohibited activities include chit funds, leasing, insurance, advertising for deposits, lending to non-members, and issuing debentures or preference shares. Filing obligations include NDH-1 (annual statutory return), NDH-2 (extension of compliance), NDH-3 (half-yearly return), and NDH-4 (declaration/updation of status). Non-compliance may attract penalties under the Companies Act, and rejected NDH-4 applications prevent filing of PAS-3 and SH-7 forms, requiring fresh compliance before reapplication.
The Ministry of Corporate Affairs has also extended the timeline for annual filings for FY 2024-25 without additional fees until 31st December 2025, though statutory deadlines for AGMs remain unchanged.
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Ministry of Corporate Affairs
Nidhi Rules
1. Incorporated Under Companies Act,1956 and declared as Nidhi (Rule 2(a)). {prior to 01.04.2014}
⇒ There are 393 such companies declared as Nidhi and are required to get their status updated under Nidhi Rules through NDH-4 application as per Rule 23B.
2. Incorporated Under Companies Act 1956/2013 and/or functioning on the lines of but not declared as Nidhi/Mutual Benefit Society (Rule 2(b) and 2(c)). {Required to file NDH-4 w.e.f.15.08.2019}
⇒ These companies need to apply for declaration through NDH-4 application within 9 months of Nidhi Amendment Rules, 2019 (Rule 23A) or 60 days after one year of incorporation or extension granted by RD under Rule 5(3) (Rule3A) as the case be.
3. Incorporated under Companies Act 2013 after 19.04.2022.
⇒ Co’s within 120 days of incorporation need to apply for declaration in NDH-4 application after complying with Net owned fund (NOF) and Members requirements under Rule 3B.
Co’s can only commence its business after Central Govt. decision approving NDH-4 application within 45 days of application.
Objective & Applicability
A) Governed under Section 406 of the Companies Act, 2013.
B) Framed to regulate Nidhi Companies—mutual benefit societies formed to encourage savings and thrift among their members.
C) These rules apply only to Nidhi Companies /mutual benefit societies as the case be.
Post-Incorporation Compliance (within 1 year)
A Nidhi Company must:
-> Have minimum 200 members.
-> Maintain Net Owned Funds (NOF) of at least X20 lakh.
->Ensure NOF to Deposits ratio does not exceed 1:20.
->Hold unencumbered term deposits of at least 10% of outstanding deposits.
-> File Form NDH-1 (Return of Statutory Compliances) certified by a CA/CS/CMA within 90 days of the financial year-end.
Membership Rules
| Only individuals can be members.
|
No body corporate or trust can become a member. | Minimum number of members: 200. | A minor cannot be a member, but deposits may be accepted in the name of a minor handled by a guardian). |
Accepting Deposits
⇒ Deposits can only be accepted from members.
⇒ Fixed deposits can be for a minimum of 6 months and a maximum of 60 months.
⇒ Recurring deposits must have a minimum tenure of 12 months.
⇒ Interest cannot exceed the rate prescribed by RBI for NBFCs.
⇒ Maximum deposit a Nidhi can hold:
- Not more than 20 times the NOF of the company as per last audited Financial Statements.
⇒ Application form to include (Rule-12)
- Company’s details, financial details, interest terms, brief particulars of management etc.
- Few statements as: In case of non payment of deposits, depositors may approach their respective bench of NCLT’s and for Deficiencies in servicing its depositors, the appropriate Consumer Disputes Redressal Forum-District, State or National as the case
Granting Loans
Loans can only be granted to members, with limits based on the member’s deposit or Nidhi’s NOF.
Secured loans only—against:
- Gold/silver/jewelry
- Immovable property
- Fixed Deposit Receipts
- National Savings Certificates
Loan limits:
- Rs. 2 lakh if total deposits < Rs. 2 crore
- Rs. 7.5 lakh if total deposits Rs. 2-20 crore
- Rs. 12 lakh if deposits Rs. 20-50 crore
- Rs. 15 lakh if deposits > Rs. 50 crore
Branches
01 Allowed only after 3 years of continuous profitability.
02 Can open up to 3 branches in a district without approval.
03 More than 3 branches in/outside a district requires Regional Director’s approval.
04 Must notify the Registrar within 30 days of opening/closing a branch.
Prohibited Activities
A Nidhi Company cannot:
01 Carry out business of chit funds, hire purchase, leasing, insurance, or acquisition of securities.
02 Advertise itself for inviting deposits.
03 Accept deposits or lend to non-members.
04 Pay brokerage or incentives for mobilizing deposits or granting loans.
05 Open current accounts with its members.
06 Deal with non-members.
07 issue preference shares, debentures, or other securities.
08 Loans can only be given to members, with limits based on deposits.
Filing Requirements
⇒ NDH-1: Annual return of statutory compliance.
⇒ NDH-2: Application to extend compliance period (if necessary).
⇒ NDH-3: Half-yearly return, filed within 30 days of each half-year.
⇒ NDH-4: Application for declaration/updation of status of Nidhi.
⇒ Annual Returns, Financial Statements and other filings as per the companies Act.
Penalties for Non-Compliance
Non-compliance with the Nidhi Rules may result in:
Penalties under the Companies Act, 2013/Nidhi Rules.
What if NDH-4 is Rejected:
> Not allowed to file PAS-3 & SH-7.
> Any deposit taken will be deemed to have been raised in pursuance of Chapter V of the Companies Act,2013.
> Liberty to refile afresh NDH-4 after all needed statutory compliance to Nidhi Rules and Companies Act 2013.
