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Nidhi means ‘TREASURE’ The main business of Nidhis, viz. borrowing from members by way of Fixed Deposits and Recurring Deposits, providing locker facility and lending to members only, are known under different names such as Nidhi, Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company.

The concept of Nidhi’s is popular in South India and are highly localized single office institutions. They are mutual benefit societies, because their dealings are restricted only to the members; and membership is limited to individuals. The principal source of funds is the contribution from the members. The loans are given to the members at relatively reasonable rates for purposes such as house construction or repairs and are generally secured.

MCA vide its notification G.S.R. 467 (E) dated 01st July, 2019 amended the definition of NIDHI and has introduced the concept of new form NDH-4 ( Applicable from 15th August, 2019)

Definition of Nidhi

Every company declared as Nidhi or Mutual Benefit Society under sub-section (1) of section 406 of the Act”

“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, and which complies with the rules made by the Central Government for regulation of such class of companies.’.


The forms is introduced with intent to declare companies as NIDHI on satisfying the eligibility criteria.

Companies registered on or after the commencement of notification shall have to file the FORM NDH-4 within sixty days from the date of expiry of:‑

(a) one year from the date of its incorporation;


(b) the period up to which extension of time has been granted by the Regional   Director under sub-rule (3) of rule 5:

Provided further that nothing in the first proviso shall prevent a Nidhi from filing Form NDH-4 before the period referred therein

The Regional Director have the power to extend time up to 1 One year.

Companies registered before the commencement of this notification shall have to file form NDH-4_

(a) Within a period of one year from the date of its incorporation


(b) within a period of six months from the date of commencement of Nidhi (Amendment) Rules, 2019, whichever is later:

In case failure to file form NDH-4, Companies shall not be allowed to file Form No. SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of Allotment).


Nidhi’s are companies registered under section 406 of the Companies Act, 2013 and is regulated by Ministry of Corporate Affairs (MCA).Even though the provisions of the Companies Act, 2013, regulate Nidhis, they are exempted from certain provisions of the Act, as applicable to other companies, due to limiting their operations within members. The detailed rules of operation for Nidhi companies have been put in place with effect from 1 April 2014 vide notification dated 31 March 2014.

1. Nidhis are also included in the definition of Non- Banking Financial companies or (NBFCs) which operate mainly in the unorganized money market. However, since 1997, NBFCs have been brought increasingly under the regulatory ambit of the Indian Central Bank, RBI. Non-banking financial entities partially or wholly regulated by the RBI include:

2. NBFCs comprising equipment leasing (EL), hire purchase finance (HP), loan (LC), investment (1C) (including primary dealers (PDs)) and residuary non-banking (RNBC) companies; mutual benefit financial company (MBFC), i.e. nidhi company;

3. Mutual benefit company (MBC), i.e. potential nidhi company; i.e., A company which is working on the lines of a Nidhi company.

4. Chit Fund Company, MNBC


As stated above the regulating body for the NIDHI is Ministry of Corporate Affairs and Nidhis come under one class of NBFCs, RBI is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these Nidhis deal with their shareholder-members only, RBI has exempted the notified Nidhis from the core provisions of the RBI Act and other directions applicable to NBFCs. As on date (February 2013), RBI does not have any specified regulatory framework for Nidhis.


  • The nature of Nidhi Company is Public Limited Company.
  • Nidhi can only deal with its members.
  • It is compulsory for Nidhi Company to have at least 200 members,
  • Within one year of its existence, the Nidhi has to maintain the Net Owned Funds of minimum Rs.10 lakh or more. The ratio of Net Owned Fund to deposit should not be more than 1:20
  • Nidhi have to maintain 200 members at any time.


A Nidhi Company is restricted to following activities-

1) To undertake the business of hire purchase, chit fund, leasing finance, acquisition of securities or insurance.

2) Micro finance business.

3) To issue preference debentures or shares.

4) To open the current account of the company member.

5) To accept, lend or deposit money to any individual other than its members.

6) To issue any type of advertisement.

7) To enter into any kind of agreement or pay brokerage to implore any kind of deposits.

8) Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or the granting loans.


As concerned to branch Nidhi can open the branch only in the state of registered office. A branch can be opened after the lapse of three years from incorporation and three branches are permitted in the district.

Closure of branch-before closure of branch Nidhi has to comply with following requirement-

  • It publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least 30 days prior to such closure.
  • Informing the public about such closure; fixes a copy of such advertisement or a notice informing such closure of the branch on the notice board of Nidhi for a period of at least 30 days from the date on which advertisement was published and
  • Intimate to the Registrar of Companies within 30 days of such closure.


The Loan Limit in Nidhi set against deposit made

Loan Amount            Deposit made
2 Lakh 2 Crore
7.5 Lakh More than 2 Crore Less than 20 Crore
12 Lakh More than 20 crore Less than 50 crore
15 Lakh 50 Crore.

 Loans are permitted against following security

1) Gold/Jewellery

2) Fixed Deposit

3) Property

4) Security

5) Insurance Policy

Following type of Loans are not permitted in NIDHI

♦ Personal Loan

♦ Micro Finance small credit

♦ Vehicle Finance

♦ Hire Purchase

The rate of interest to be charge on any loan given by a Nidhi small not exceed 7.5% above the highest rate of interest offered on deposits by Nidhi and Interest charged on loan amount is on reducing balance method


  • Nidhi can accept fixed deposit, Recurring Deposit, Saving deposit.
  • Nidhi shall not accept deposits exceeding 20 times of its Net Owned Assets as per last audited financial statements.net owned fund to deposit ratio is 1:20
  • The fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of 60 months.
  • Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period of 60 months.
  • In case of recurring deposits relating to mortgage loans, the maximum period of recurring deposits shall correspond to the repayment period of such loans granted by Nidhi.
  • The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed Rs.1,00,000/- and the interest shall not exceed 2% above the rate of interest payable to savings bank account by nationalized banks.
  • Interest for fixed and recurring deposits shall be at a rate not exceeding the maximum rate of interest prescribed by RBI, which the NBFC can pay on their public deposits.
  • Every Nidhi shall invest and continue to keep invested, in unencumbered term deposits with a scheduled commercial bank or post office deposits in its own name an amount which shall not be less than 10% of the deposits outstanding at the close of the business on the last working day of the second preceding month.


  • No service charge shall be levied for issue of shares.
  • Every Nidhi shall allot to each deposit holder at least a minimum of 10 equity shares or shares equivalent to Rs.100/-
  • A savings account holder and a recurring deposit account holder shall at least 10 equity shares of Rs.10/-.


The director of the Nidhi shall be a MEMBER of Nidhi and shall hold office for a term up to 10 consecutive years. And shall be eligible for re-appointment only after expiration of 2 years of such cessation and has to comply with Section 152(4) and 164 of the Companies Act, 2013.

Where the Central Government in any case had already extended the tenure of any director, it shall terminate on expiry of such extended tenure.


There are certain compliance are specified As Annual, Half yearly compliance.



Within 90 days from the closure of the first financial year after its incorporation and where applicable, from second financial year, Nidhi shall file a return of statutory compliances in Form NDH – 1 along with such fee as prescribed with the Registrar duly Certified by company secretary in practice or a chartered accountant in practice or a cost accountant in practice.

(for Extension)

Within thirty days from the close of the first financial year, apply to the Regional Director along with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for extension of time and the Regional Director may consider the application and pass orders within thirty days of receipt of the application.

Regional director may extend the time unto 1 One year.


(Half yearly)

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.


If a company contravenes any of the provisions of the rules the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs.5,000/- and where the contravention is a continuing one, with a further fine which may extend to Rs.500/- for every day after the first during which the contravention continues.

Disclaimer: The information contained in this write up is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Authors recommend that professional advice is sought before taking any action on specific issues. The author can be however contacted for further clarification at 85600-29055 or via mail at cs.compliancek@gmail.com


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July 2024