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Nidhi Company is governed by Section 406 of the Companies Act, 2013 and Company Nidhi Rules, 2014. The company is incorporated as a public company. Nidhi Company is one of the categories of Non-Banking Financial Company (NBFC) that does not require any Reserve Bank license.

Incorporation of Nidhi Company

  • Get DIN and DSC for minimum 3 directors.
  • Get name approval in the form of public limited company with adding word Nidhi Limited in INC-1
  • File documents with Registrar of Companies, for incorporation in INC-7, DIR-12 and INC-22.


  • Minimum Seven Members: Nidhi Company can be started with seven members. Out of which 3 are also to be appointed as directors.
  • No Minimum Capital Requirement: This requirement has been officially waived off by the Ministry of Corporate Affairs (MCA). Earlier, it was used to be INR 5 lakh, but now you can register Nidhi Company with any amount of capital of your choice.
  • No Preference Shares shall be issued.
  • The object of the company shall be cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending to its members only for their mutual benefits.


• Not Less than 200 Members: After incorporation, a Nidhi company must add at least 200 members to comply with this requirement of law. Further, it has to maintain this during the course of time. If the total members falls less than 200 at anytime thereafter, it will leave the company at default.

However, are not able to reach the limit of 200 members, then you must apply for time within 30 days of closure of financial year in Form NDH-2 with Regional Director.

• Net Owned Funds of 10 lakh or more: In a layman language, Net owned funds means amount invested into the business. As already stated, this requirement can be fulfilled by registering the company at INR 10 lakh capital.

Unencumbered term deposits of not less than 10% of the outstanding deposits as per Rule 14.

A Nidhi Company shall not admit a body corporate or trust as a member.

A minor shall not be admitted as a member of Nidhi Company.

• Net owned funds to Deposits should be 1:20: This ratio is very easy to understand. Suppose, if you have net owned funds of 10 lakh, then your total deposit limit would be INR 2 Crore.


No Nidhi shall carry on:

  • The business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities by anybody corporate.
  • Issue preference shares, debentures, or any debt instrument by any name or in any form whatsoever.
  • Open any current account with member.
  • Acquire another company by purchase of securities or Control the composition of the Board of Directors of any other company in any manner whatsoever. Carry on any business other than the business of borrowing or lending in its own name;
  • Accept Deposits from or lend to any person, other than its members;
  • Pledge any of the assets lodged by its members as security;
  • Take Deposits from or lend money to anybody corporate;
  • Enter into any Partnership Arrangement in its borrowing or lending activities;
  • Issue or cause to be issued any advertisement in any form for soliciting deposit;
  • Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or the granting loans.
  • Enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over Nidhi.


NDH-1: Return of Statutory Compliances. Within 90 days from the closure of the first financial year after its incorporation and where applicable, the second financial year, Nidhi shall file a return of statutory compliances in Form NDH–1 along with such fee as prescribed with the Registrar duly certified by a Company Secretary in practice or a Chartered Accountant in practice or a Cost Accountant in practice.

NDH-2: Apply to the Regional Director for extension of time: If the company is not complying with the above it shall within90 days from the close of the first financial year, apply to the Regional Director in Form NDH -2 along with fee for extension of time and the Regional Director may consider the application and pass orders within 30 days of the receipt of the application.

NDH-3: Half yearly return with the Registrar: In Form NDH-3 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within thirty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice.

Note: RBI has exempted the notified Nidhi’s from the core provisions of the RBI Act and other directions applicable to NBFCs. As on date, RBI does not have any specified regulatory framework for Nidhi’s. The provisions of Section 45-IA (Compulsory Registration with RBI), Section 45-IB (Maintenance of Liquid Assets), Section 45-IC (Creation of Reserve fund) have been exempted for Nidhi Companies.

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Arti Agarwal
Category Corporate Law   Report

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