What is a Nidhi Company?
A Nidhi Company is a category of NBFC registered under the Companies Act, 2013 to promote savings and mutual lending among members. Unlike banks, it cannot deal with outsiders and operates only on the principle of “for members, by members.”
- It must be incorporated as a Public Limited Company.
- It should have “Nidhi Limited” as the last words of its name.
- It is exempted from RBI licensing requirements, making it easier to register.
Prohibited Activities: Nidhis cannot operate chit funds, leasing, hire purchase, insurance, securities, or raise deposits from non-members.
Minimum Requirements for Nidhi Registration
| Requirement | Minimum Condition |
| Members | 7 members (3 as directors) at incorporation; 200 within 1 year |
| Share Capital | ₹5 lakh equity share capital at start; must reach ₹10–20 lakh NOF in 1 year |
| Directors | Minimum 3 directors (must comply with Section 164 disqualifications) |
| Ownership | Only equity shares, no preference shares allowed |
| Deposits | Capped at 20x Net Owned Fund |
Documents Required for Nidhi Company Registration
- Proof of registered office (ownership docs / rent agreement).
- NOC from landlord (if rented).
- PAN, Aadhaar, ID and address proof of all members & directors.
- Passport-sized photos.
- Digital Signatures (DSC) for directors.
- Director Identification Number (DIN).
- MOA & AOA drafted with the main object:
“Cultivating the habit of thrift and savings among its members, receiving deposits from, and lending to, its members only, for their mutual benefit.”
Forms to be Filed
- INC-9 (Declaration by Subscribers).
- DIR-2 (Consent to act as Director).
- SPICe+ (INC-32) for incorporation.
- e-MOA (INC-33) and e-AOA (INC-34).
- NDH-4 (Declaration as Nidhi within 120 days).
Conditions to Achieve ‘Nidhi’ Status
Within 1 year of registration, a company must:
- Have at least 200 members.
- Maintain Net Owned Funds ≥ ₹20 lakh.
- Keep 10% of deposits as unencumbered term deposits with scheduled banks.
- Maintain 1:20 NOF to Deposit ratio.
If conditions are met, file NDH-1 within 90 days from end of first FY (certified by CA/CS/CMA).
If not met → Apply to Regional Director via NDH-2 for extension (1 more year allowed).
If still not compliant after 2nd FY → Nidhi cannot accept deposits until compliance is achieved + penalty applies.
Step-by-Step Process of Nidhi Company Registration
- Apply for DSC & DIN of directors.
- Reserve Name through RUN/SPICe+ (must end with “Nidhi Limited”).
- Prepare MOA & AOA with Nidhi object.
- File SPICe+ (INC-32) with attachments.
- Obtain Certificate of Incorporation (COI) from ROC.
- Apply NDH-4 within 120 days for Nidhi status.
Timeline: 15–25 days for incorporation + 120 days for NDH-4 declaration.
Compliance Overview
| Compliance | Form | Frequency |
| NDH-1 | Within 90 days of FY end | Annually |
| NDH-2 | Extension request if 200 members/NOF not met | Annually if needed |
| NDH-3 | Half-yearly return (30th April & 31st Oct) | Twice yearly |
| MGT-7 | Annual Return | Annually |
| AOC-4 | Financial Statements | Annually |
| ADT-1 | Auditor Appointment | Every 5 yrs / AGM |
| ITR-6 | Income Tax Return | Annually |
Benefits of Nidhi Company
- No RBI license required.
- Simple to incorporate and operate.
- Affordable credit to members.
- Encourages small savings.
- Trust-based, community-driven model.
Risks Associated with Nidhi Company
- Strict compliance burden.
- Limited scope (cannot operate like NBFCs).
- Risk of liquidity crunch if deposits are withdrawn.
- Heavy penalties for non-compliance.
- Dependent only on membership growth.
Q1. Can a Nidhi accept deposits from non-members?
No, only members can deposit or borrow.
Q2. Is RBI approval needed?
No, Nidhis are exempt but regulated by MCA.
Q3. What happens if NDH-4 is not filed?
Company cannot function as a Nidhi, cannot raise deposits or lend.
Q4. Can Nidhi issue preference shares?
No, only equity shares are allowed.
Q5. How many directors are needed?
Minimum 3 at incorporation; must be members of the company.
Conclusion
A Nidhi Company is one of the simplest ways to start a finance business for community savings and loans. With limited compliance compared to NBFCs and banks, it is cost-effective and trust-driven.
However, strict adherence to Nidhi Rules and MCA regulations is crucial. Meeting conditions of membership, capital, deposits, and NDH filings ensures smooth functioning and long-term credibility.
For entrepreneurs aiming to promote savings and provide credit in their community, Nidhi Company registration is the right step.