Nidhi Company Incorporation Road Map in 2025

Simple, Practical & Step-by-Step Guide for New Businesses

A Nidhi Company is a special category of company registered under the Companies Act, 2013, primarily for encouraging savings and lending among its members only. It operates similar to a small community-based finance model where deposits and loans are managed internally, ensuring transparency and financial discipline.

With the Ministry of Corporate Affairs (MCA) redefining approval rules through NDH-4 based approval, the incorporation approach in 2025 must be carefully planned. Below is the complete, easy-to-understand roadmap covering pre-incorporation, post-incorporation, compliance milestones, and final name approval.

1. Pre-Incorporation Planning

Before filing the incorporation documents, ensure the following eligibility and documentation requirements:

• Minimum Members: 7

• Minimum Directors: 3

• Authorised & Subscribed Share Capital: Minimum ₹20,00,000

• Name Approval: File SPICe+ Part A

  Note: The word “Nidhi” cannot be used in the name at incorporation stage. Choose names related to Finance, Funds, Capital, Investments, Growth etc.

2. Incorporation Stage (Company Registration)

File SPICe+ Part B and related documents through MCA, including:

• MOA & AOA aligned with Nidhi objective

• Declaration of subscribers & directors

• Registered office documents (temporary or permanent)

Once approved, Certificate of Incorporation (COI) and Company Identification Number (CIN) will be issued.

3. Immediate Post-Incorporation Compliance

After incorporation, complete the following mandatory steps:

4. Nidhi-Specific Milestones

The success of a Nidhi company depends on achieving prescribed conditions and filing statutory reports:

NDH-4 Approval Outcome:

• Deemed approval / approval / resubmission / rejection within 45 days

• If rejected, re-apply after correction

5. Post Nidhi Status – Final Legal Branding

Once NDH-4 approval is received, proceed with official naming as a Nidhi Company.

Steps:

1. File INC-20A – Commencement of Business

2. File SPICe+ Part A again for name reservation containing the word “Nidhi”

3. File MGT-14 for special resolution approval from shareholders

4. File INC-24 for final name change approval from MCA

5. Update the new company name in:

   • Bank account

   • PAN/TAN & GST

   • Letterheads, website, seal, display board

   • Share certificates

Finally, issue revised share certificates under the new name.

Conclusion

Incorporating a Nidhi Company in 2025 is not just a legal filing process—it is a structured compliance journey. With proper planning, capital management, timely filing of NDH-1 and NDH-4, and controlled financial discipline, you can successfully build a legally recognized community finance institution.

1. What is a Nidhi Company

A Nidhi Company is a special type of mutual benefit financial company registered under the Companies Act, 2013 with the objective of encouraging savings among its members and providing loans only to those members. It functions like a community-based financial institution where funds are accumulated through internal savings, and lending is done at reasonable interest rates. It does not operate like a commercial bank and does not deal with the general public.

2. Under which legal framework does a Nidhi Company operate

A Nidhi Company is incorporated under the Companies Act, 2013 and operates under the regulatory framework of the Nidhi Rules, 2014 issued by the Ministry of Corporate Affairs (MCA), Government of India. It also needs to follow certain RBI guidelines applicable to deposit-based member organisations, even though it is exempted from obtaining an RBI licence.

3. Does a Nidhi Company require RBI approval to operate

No, a Nidhi Company does not require an RBI licence because the Reserve Bank of India has granted exemption to Nidhi Companies, subject to strict compliance with Nidhi Rules. However, any violation of prescribed limits, deposit rules or lending restrictions may attract action under RBI or MCA regulatory powers.

4. What is the minimum capital requirement to register a Nidhi Company

The minimum authorised and subscribed share capital required for forming a Nidhi Company is Rs. 20,00,000. This entire capital must be deposited into the company’s bank account after incorporation and should be reflected as part of the company’s Net Owned Fund for further statutory filings and NDH recognition.

5. How many members are required at the time of incorporation

For incorporation, a minimum of seven members are required, out of which three must be appointed as directors. After incorporation, it is compulsory to increase total membership to 200 individuals within 90 days of incorporation in order to meet the NDH-4 eligibility requirement.

6. How many directors are mandatory for a Nidhi Company

A minimum of three directors are required for incorporation. Directors must meet the eligibility criteria, provide KYC documents, DIN availability, consent to act as directors, and also be responsible for statutory compliance, financial discipline and decision-making.

7. Can an existing private company convert into a Nidhi Company

Yes, an already registered private limited company can apply for conversion into a Nidhi Company by fulfilling all compliance conditions related to capital, membership and filing NDH-4, followed by approval from MCA. Only after approval can it legally operate as a Nidhi Company.

8. Can the word Nidhi be used in the company name during incorporation

No, the word “Nidhi” cannot be used at the time of incorporation. Initially, the company is incorporated without using the word Nidhi. Only after obtaining NDH-4 approval can the company apply for name change and insert the word “Nidhi Limited” in the name.

9. What type of names are allowed during initial name approval

During the incorporation stage, names related to finance, investment, capital, savings, growth, development or fund management may be proposed. Names implying RBI-regulated business, chit fund, money circulation or microfinance are strictly prohibited.

10. What is NDH-1 and when is it filed

NDH-1 is a mandatory annual return that must be filed within 90 days from incorporation. It contains details such as total member count, deposits accepted, loans disbursed, Net Owned Fund position, and other eligibility-related information to show initial compliance.

11. What is NDH-4 and why is it important

NDH-4 is the approval application submitted to MCA for official recognition as a Nidhi Company. It verifies compliance related to minimum membership, capital adequacy, financial discipline and other conditions. Without NDH-4 approval, a company cannot act or promote itself as a Nidhi.

12. What is the timeline for filing NDH-4

NDH-4 must be filed within 120 days from the date of incorporation. Filing delays, incomplete supporting records, or failure to meet eligibility conditions may lead to rejection or resubmission instructions from MCA.

13. What is the timeline for NDH-4 approval by MCA

NDH-4 application is normally processed within 45 days. MCA may approve, ask for further clarification, or reject the application based on supporting evidence, compliance performance and validity of submitted records.

14. What happens if NDH-4 gets rejected

If NDH-4 is rejected, the company must correct the areas of non-compliance, improve financial or membership performance, and reapply. Failure to regularise status could affect operations and may restrict commencement filings.

15. How many members must be added after incorporation

A minimum of 200 members must be added within 90 days from incorporation. Membership records must include admission forms, KYC documents, share allotment details, and statutory register entries.

16. What is the minimum Net Owned Fund requirement

A company must maintain a minimum Net Owned Fund (NOF) of Rs. 10,00,000 after incorporation. NOF includes paid-up equity capital plus free reserves minus accumulated losses and intangible assets.

17. Can deposits be accepted from persons who are not members

No, deposits can only be accepted from registered members. Offering deposit-related schemes to non-members violates Nidhi norms and can lead to penalties and cancellation of status.

18. Can a Nidhi Company provide loans to non-members

No, loans can only be granted to members. All loan agreements, security documents, KYC verification and approval processes must be properly documented.

19. What type of loans can a Nidhi Company provide

A Nidhi Company may provide secured loans based on permitted security classes such as gold, fixed deposits, insurance policy values or immovable property. Loan limits, terms, and interest rates must comply with Nidhi Rules.

20. Are unsecured or personal loans allowed

No, unsecured lending or high-risk personal financing is not allowed because Nidhi operations must be low-risk and asset-secured to protect members’ savings and company funds.

21. Can Nidhi Companies issue preference shares or debentures

No, Nidhi Companies are not permitted to issue preference shares, debentures or any instrument representing debt or special conversion rights. Only fully paid equity shares are permitted.

22. Are commissions or incentives allowed for deposit mobilisation

No, commission, brokerage, referral fee or incentive related to deposit mobilisation is prohibited to avoid mis-selling or unfair inducement.

23. When must the first Board Meeting be conducted

The first Board Meeting must be held within 30 days of incorporation where initial resolutions for auditor appointment, bank account authorisation, share certificate approval and statutory registers are passed.

24. When must the first auditor be appointed

A statutory auditor must be appointed within 30 days from incorporation and the appointment must be recorded officially in the Board Meeting along with consent and eligibility confirmation.

25. When must share certificates be issued

Share certificates must be issued within 60 days from incorporation or allotment, whichever applies, and they must be signed and stamped as per law.

26. When should the company open a bank account

A current account should ideally be opened within 45 days of incorporation, capital must be deposited and further transactions must be routed through this account.

27. When must INC-20A be filed

INC-20A, the declaration of commencement of business, is filed only after NDH-4 approval. Without this filing, the company is not legally permitted to commence business operations.

28. Is digital lending allowed for Nidhi Companies

Digital lending is allowed only if it is strictly member-based and meets compliance requirements. However, it cannot resemble fintech lending models involving external platforms or third-party fund transfer arrangements.

29. Can a Nidhi Company offer ATM or debit card facilities

No, such facilities are not permitted because they are treated as banking functions and require a banking licence.

30. Can a Nidhi Company open multiple branches

The company may open branches only after it has achieved profitability for three consecutive financial years and after following prescribed government procedure for branch establishment.

31. Can a Nidhi Company operate outside India

No, operations are strictly limited to India. It cannot conduct financial activity for persons residing outside India or maintain overseas branches.

32. Can minors become members of a Nidhi Company

Minors are not permitted to become members because they cannot legally enter into contracts. However, a minor may be associated under a guardian account for deposit purposes only.

33. Can corporate bodies or trusts become members

No, only individual persons are permitted to become members. Bodies corporate, firms, associations, and trusts are not eligible for membership.

34. Are statutory registers required to be maintained

Yes, registers of members, deposits, loans, share allotment, attendance and charges must be maintained and updated regularly, physically or digitally in accordance with law.

35. Is annual statutory audit compulsory

Yes, the financial statements must be audited by a Chartered Accountant every financial year. Audit ensures transparency, compliance and financial credibility.

36. Can shares be transferred between members

Yes, shares may be transferred between members subject to documented approval, issuance of share transfer forms, payment of stamp duty and register update.

37. Can recurring deposits be accepted

Yes, recurring deposits are permitted from members based on approved company policies. Tenure, withdrawal, penalty and interest conditions must be pre-defined and documented.

38. Can online membership onboarding be done

Yes, digital onboarding is allowed but KYC documents, identity verification and membership approvals must be completed before accepting deposits or offering loans.

39. How is the rate of interest determined for deposits and loans

Interest must comply with prescribed Nidhi Rules and should be reasonable, transparent, non-exploitative and approved by the Board. The company must maintain fairness and financial stability.

40. What are the consequences of non-compliance or failure to meet milestones

Non-compliance may lead to penalties, resubmissions, restrictions, cancellation of Nidhi status, disqualification of directors, and possible legal action by MCA. It may also impact the company’s reputation and financial continuity.