Introduction

Nidhi Companies are unique entities under the Companies Act, 2013, established to promote the habit of savings among members and provide loans only to their members. Since they deal with public deposits, the law imposes strict conditions on their functioning. One of the most important rules relates to the minimum requirements that every Nidhi must meet within one year of incorporation.

In this article, we will break down these requirements, explain their purpose, and highlight the consequences of non-compliance.

The Five Key Requirements

Every Nidhi Company, within one year from the date of incorporation, must ensure the following:

1. Minimum 200 Members

A Nidhi cannot remain a small, closely-held company for long. It must expand its membership base and have at least 200 members within the first year. This ensures that the company genuinely serves a wider group of people, rather than being restricted to just a few promoters.

2. Net Owned Funds of ₹20 Lakh or More

Net Owned Funds (NOF) are the owned capital of the company, excluding outside liabilities. The law requires every Nidhi to maintain at least ₹20 lakh as NOF. This condition ensures financial strength and provides security to depositors.

3. Minimum 10% of Outstanding Deposits as Unencumbered Term Deposits

Every Nidhi must keep at least 10% of its outstanding deposits in the form of unencumbered term deposits (that is, deposits not pledged or charged to any liability). This acts as a safeguard so that if there is sudden withdrawal demand or liquidity issue, the company has sufficient funds readily available.

4. Ratio of NOF to Deposits Not More Than 1:20

The deposits that a Nidhi accepts from members cannot be unlimited. The company can accept deposits only up to 20 times of its Net Owned Funds. For example, if a Nidhi has NOF of ₹10 lakh, it cannot accept deposits exceeding ₹2 crore. This ratio ensures that the company’s deposits are always proportionate to its owned capital.

5. Filing of Return in Form NDH-1

Within 90 days from the close of the first financial year, and if required, also for the second financial year, the Nidhi must file a return of statutory compliances in Form NDH-1. This return, duly certified by a practicing professional (CS, CA, or CMA), provides details of compliance with the above requirements to the Registrar of Companies.

Extension of Time – Form NDH-2

If a Nidhi is unable to meet the conditions of 200 members or the 1:20 NOF-to-deposit ratio within one year, it can apply to the Regional Director in Form NDH-2 within 30 days from the close of the first financial year. The Regional Director has the power to grant an extension of up to one additional year.

This provision gives genuine companies some breathing space, but it also places them under direct scrutiny of the Ministry of Corporate Affairs.

Consequences of Non-Compliance

If a Nidhi fails to comply with the requirements even by the end of the second financial year:

• It cannot accept any further deposits until compliance is achieved.
• It will be liable for penal consequences under the Companies Act, 2013.
• It must also obtain a declaration under Section 406(1) of the Companies Act to continue as a Nidhi.

This effectively means that non-compliant companies are blocked from carrying out their core business of accepting deposits.

Exemption for New Nidhis (2022 Amendment)

The Nidhi (Amendment) Rules, 2022 introduced an important clarification:
Companies incorporated as Nidhis after the commencement of the 2022 rules are exempt from these particular provisions. Instead, they must comply with the new framework laid down under Rule 3B, which requires approval from the Central Government through NDH-4 before commencing operations.

Key Points in Simple Words

• A Nidhi must have 200 members and ₹10 lakh Net Owned Funds within 1 year.
• It must maintain 10% of deposits as unencumbered term deposits.
• Deposits cannot exceed 20 times the Net Owned Funds.
• Compliance must be reported in Form NDH-1, certified by a professional.
• Extension may be sought via Form NDH-2.
• Failure to comply leads to ban on accepting deposits and penalties.
• These rules do not apply to new Nidhis incorporated after 2022, as they follow Rule 3B.

Conclusion

The requirements under this rule are designed to ensure that a Nidhi Company does not operate without financial strength or credibility. The insistence on minimum members, adequate capital, liquidity safeguards, and filing of statutory returns reflects the government’s intention to protect depositors and promote only genuine mutual benefit companies.

For promoters, this means careful planning from day one. A Nidhi must be structured to meet these requirements within the first year, or risk restrictions and penalties. For depositors, it provides a level of security, knowing that the company they are dealing with meets minimum financial and governance standards.