Nidhi Company

A Nidhi company is a type of non-banking finance company incorporated to cultivate the habit of thrift and savings among its members, borrowing from and lending to them exclusively. It is governed by Section 406 of the Companies Act, 2013 read with the Nidhi Rules, 2014 (as amended) and is administered by the Ministry of Corporate Affairs (MCA) and the Central Government rather than the RBI directly. It remains a category of NBFC but is exempt from most RBI provisions because it transacts only with its own members.

Key features

• Incorporated as a public limited company with "Nidhi Limited" as the last words of its name.
• Minimum 7 members and 3 directors, with minimum paid-up equity share capital of Rs 10 lakh at incorporation.
• Must reach at least 200 members and Net Owned Funds (NOF) of Rs 20 lakh, raised from the earlier Rs 10 lakh by the Nidhi (Amendment) Rules, 2022.
• Deposits accepted cannot exceed 20 times NOF (a 1:20 ratio), and unencumbered term deposits must be at least 10% of outstanding deposits.

Declaration as Nidhi

A newly incorporated company must apply to the Central Government in Form NDH-4 within 120 days of incorporation to be declared a Nidhi. If no decision is conveyed within 45 days, approval is deemed granted. Ongoing compliance includes Form NDH-1 (return of statutory compliances), NDH-2 (application for extension of time) and the half-yearly return NDH-3.

Restrictions

A Nidhi cannot issue preference shares, open current accounts for members, or carry on chit fund, hire-purchase, leasing or insurance business. It may not accept deposits from, or lend to, anyone other than its members, nor advertise to solicit deposits.