What is Nidhi Company?

Nidhi company is a company incorporated under Section 56 of Companies Act of 1956. It is a type of NBFC (Non-Banking Financial Company). The main motto of Nidhi company is to promote savings and thrift among its members. Nidhi company is most popular in South India and is more widely known under different names as Nidhi, Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company.

Nidhi business structure is limited only to its members. Receiving deposits from the members and lending of loans only to its members at reasonable interest rates for mutual benefit. Every Nidhi Company is governed by the Ministry of Corporate Affairs (MCA) and all its financial ledgers are contemplated by RBI(Reserve Bank of India).

Advantages of Nidhi Company:

  • Nidhi Companies can be incorporated as a Public Limited Company.
  • Limited RBI regulations as Nidhi companies deal only with their shareholders for deposits and loans. RBI has excluded Nidhi companies from major provisions of RBI Act for NBFCs.
  • According to Nidhi Rules of 2014, the minimum capital required to start a Nidhi Company is only Rs.5 lakhs.
  • Minimum of only seven members is required for the Incorporation of the company.

Benefits of NIdhi Company:

 Cheaper Interest Rates: Nidhi companies lend money at an interest comparatively lower than that of the bank loans. The mutual benefit of all the members of the company is assured as different individuals need money at different points of time.

Prudential Lifestyle: Nidhi company promotes a thrifty lifestyle amongst its members and encourages savings for the mutual benefit of each other.

Safer: Lending money to its known members are safer and involves fewer complications than that of loans of banks.

Procedure for Nidhi Company Registration:

Registration of a Nidhi Company is an easy-peasy process. The process is completely online.

KYC of Directors and Members:

All the directors and members of the company must complete a KYC process. There should be at least three directors amongst the seven members.

Obtaining Digital Signature:

All the members are mandated to obtain the Digital Signature Certificate(DSC). It shall be used to digitally sign the documents.

Choosing the Name:

Three names are to be submitted to the Ministry of Corporate Affairs (MCA). Out of which MCA  will choose one name for the company. The name should not resemble any previously established ventures. SPICe+ form will help in applying for the name of the company.

MoA and AoA:

Memorandum of Association and Article of Association are to be submitted. Reviewing those, Certificate of Incorporation will be issued.

Opening of Bank Account:

PAN, TAN, MoA and AoA are required to open a bank account and comply with the regulations of RBI.

Documents Required :

  • Copy of Directors Pan card
  • Identity proof of every shareholder and the director
  • Passport size photos of all the directors
  • Electricity bill or other utility bills for the address proof
  • Aadhaar Card of Directors as well as of Shareholders
  • Address proof of the directors and shareholders
  • Rent agreement copy (In case if rented)
  • No-Objection-Certificate (NOC) from the Landlord
  • Property papers copy

Pre-Registration Checklist:

  • Minimum of 3 directors
  • Minimum of 7 members
  • Minimum capital requirement- Rs 5 Lakh
  • Non-issuance of preference shares
  • The primary objective of the company is to cultivate the habit of savings and thrift among its members.
  • DIN for Directors

Post-Registration Checklist:

  • The company needs to have at least 200 members by the end of 1 year.
  • Net-owned funds by the company should be at least 10 lakhs by the end of the first year.
  • The prescribed ratio of the Net Owned Fund to Deposits should not exceed more than 1:20.
  • A Nidhi Company is not entitled to admit a minor, trust, or a body corporate as a member.
  • Unencumbered deposits should be more than 10% of outstanding deposits.

Nidhi Company Rules:

A registered Nidhi Company shall not indulge in the business of Chit Fund, Hire Purchase Finance, Leasing Finance, Insurance or Acquisition of Securities issued by anybody corporate.

  • It shall not issue any preference shares, debentures or any other debt instruments.
  • Should not open any current account with its members.
  • Should not acquire any other business by the purchase of shares or control of the board of directors of the other company.
  • Should not change the management of the company unless a general agreement in the meeting and approval by the Regional Director.
  • Shall not involve in any other business other than borrowing and lending.
  • Shall not accept deposits or lend money to any persons other than its members.
  • Shall not accept deposits or lend money to corporates.
  • Shall not issue any advertisement procuring deposits.
  • Should not pay any brokerage or incentives to the members for favouring deposits.


  • Nidhi should not admit a corporate or trust as its member.
  • EveyNidhi should maintain a minimum of 200 members at any time.
  • A minor less than 18 years shall not be a member of the company. But deposits can be accepted in the name of a minor, duly signed by the legal guardian.


  • Nidhi companies shall not permit deposits that exceed 20 times of its Net Owned Assets as per last audited financial statements.
  • The fixed deposits shall be permitted for a minimum period of 6 months and a maximum period of 60 months.
  • Recurring deposits shall be permitted for a minimum period of 12 months and a maximum period of 60 months.


Restrictions are placed for providing loans to the members according to the deposit acquired by the company.

1. Loan amount 2 lakhs – If the deposit is two crores.

2. A loan amount of 7.50 lakhs – If the deposit is more than two crores but less than 20 crores.

3. A loan amount of 12 Lakhs – If the deposit is more than 20 crores but less than 50 crores.

4. Loan amount 15 lakhs – If the deposit is more than 50 crores.


The dividend should not exceed 25%.


A director shall be a member of the company. Tenure of the director is 10 years. A director is only eligible for re-appointment only after 2 years of resigning from the director of the company.


  • A Nidhi Company is allowed to open branch only after furnishing Net profit after tax for 3 consecutive years.
  • It can open up to 3 branches in a district.

Author Bio

Qualification: MBA
Company: Topfilings India Pvt Ltd
Location: Delhi, New Delhi, IN
Member Since: 21 Mar 2020 | Total Posts: 9
We are a team of CA, CS, MBA, LLB professionals who have more than 20 years experience in the field of Finance, Compliances, Legal and Accounts work with an objective of to provide our experiences and services at a very affordable cost to young and growing entrepreneurs View Full Profile

My Published Posts

More Under Company Law


  1. muthusubramanian says:

    kindly mention for fdr maturity of nidhi co. they are asking 3days notice before the maturity and fdr should have to be discharged to be given. They wont give maturity of deposit notice and after three days of present only the are issu;ing cheques presented to my bank including interest and maturity and some times after maturity they are giving interest amount after 6 days of maturity by depositing in my bank. In this unethical practice they are taking advantage of covid lock down and presenting the cheque after lock down. My amount of fdr maturing of 10.06.2020 presented for payment. But every deposit I am sending RTGS through Bank to their Head Office account Bank only, but they are diverting the funds to their various city branches and while maturity they are taking much time for presenting the chque to my bank and incuring losses of rs.17000/- for total amount of 2625000/- for one year deposit and directors are not giving their mobile nos and also in website and they are not informing on which date they are going to deposit my maturity cheque and interest and giving maturity cheque on 07.07 .2020 and interest cheque on 13.07.2020. In this situation I have sent my grievances through MAIL TO THEIR MAIL ID AND ALSO THEIR WEBSITE MAIL ALSO WHICH SHOWS 24 HOURS REPLY YOU WILL GET AND NO REPLY SO FAR FOR FOUR WEBSITE MAIL AND FIVE E-MAILS AND I HAVE SENT LETTER TO THE NIDHI CO. AND THROUGH MY REPRESENTATIVE AND THEY ARE REPLYING WE HAVE PAID INTEREST AND PRINCIPLE AND NOT RECEIVING THE LETTER. THEN ONCE AGAIN I SENT THAT LETTER COPY AND MY GRIEVANCES ONE FINAL MAIL THROUGH THEIR MAIL ID AND ALSO THEIR WEBSITE MAIL ID. IN THIS SITUATION KINDLY ADVICE ME TO GET THE COMPENSATION THROUGH WHICH BODY LIKE COMPANY LAW BOARD OR DEPT. OF COMPANY AFFAIRS OR RBI NBFC OMBUDSMAN 2018 AND HOW TO PROCEED . KINDLY EXPLAIN .

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

April 2021