A nidhi company, is one that belongs to the non-banking Indian finance sector and is recognized under section 406 of the Companies Act, 2013. Their core business is borrowing and lending money between their members. They are also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company. They are regulated by Ministry of Corporate Affairs. Reserve Bank of India is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these companies deal with their shareholder-members only.

“The basic concept of nidhi is “Principle of Mutuality” (“Paraspara Sahayata”). Thus they function for the common benefit advantage of all their members/share holders.”

Nidhi Company is a type of Non-Banking Financial Company (NBFC). It is formed to borrow and lend money to its members. It inculcates the habit of saving among its members and works on the principle of mutual benefit.

· A Nidhi Company is incorporated as a Public Company with a minimum of 7 members and shall have a minimum paid up Capital of Rs. 5 Lakhs.

· Nidhi Company shall not incorporate any Object in its Memorandum of Association other than 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.

· Nidhi Company cannot issue preference shares.

·As per Rule 5(1) of the Rules, aNidhi Company shall ensure the following within 1 yearof the date of its registration:

  1. It should have not less than 200 members.

2. Net owned Funds of the Company should be 10 Lakhs or more.

3. Ratio of Net Owned Funds to deposits of not more than 1:20.

4. Unencumbered term deposits of not less than ten per cent. of the outstanding deposits.

· Activities or Transactions, a Nidhi Company is prohibited from undertaking:

A Nidhi Company shall not:

  1. Open current account of its members.

2. Accept Deposits from or Lend to any person other than its members.

3. Accept Deposits from or Lend to any Body Corporate or a Trust. (This means that a Body Corporate or a Trust cannot be a member of a Nidhi Company)

4. Acquire any securities issued by any Body Corporate.

5. Pledge any of the assets lodged by any of its member as security.

6. Enter into any partnership arrangement in its borrowing or lending activities;

7. Others as provided under Rule 6 of the Rules.


· A Nidhi is required to file return of Statutory Compliances in E-form NDH-1 within 90 days of the closure of the First Financial Year or the Second Financial Year as case may be, after its Incorporation for reporting Compliance with the Rule 5(1). This Return is to be duly certified by a Practicing Company Secretary or a Practicing Chartered Accountant or a Practicing Cost Accountant.

· Where the Nidhi has failed to comply with Rule 5(1) by the end of the First Financial Year, It shall within 30 days file Form NDH-2 with the Regional Director for extension of time that can be granted till the end of the Second Financial Year.

Consequences of Failure to comply with the above: Nidhi shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions as aforementioned.

· Every Nidhi Company shall file a half yearly return in Form NDH-3 within 30 days from the end of each Half year and the return is to be certified by Practicing Company Secretary or a PracticingChartered Accountant or a Practicing Cost Accountant.



A Nidhi Company has to issue each deposit holder a minimum of 10 Equity Shares having a Nominal Value of atleast Rs. 10 per share aggregating to a minimum holding of Rs. 100/- per depositor.

A Nidhi has to ensure that its total Deposits at any point of time shall not exceed 20 timesof its net owned Funds.