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When you start a company, it becomes your baby, and one of the hardest things to do is to let go of it. The same thing is with a Nidhi Company. People get the idea behind it but fail to interpret the requirements of the law. What is a Nidhi Company is actually defined under Section 406 of the Companies Act, 2013 and governed by Nidhi Rules, 2014 and RBI Guidelines.

A Nidhi Company is a type of company which is formed to borrow and lend money to its members. It inculcates the habit of saving among its members and works on the principle of mutual benefit. It doesn't require to take a license from the RBI. Instead, it is registered as a Public Company and should have “Nidhi Limited” as the last words in its name.

As per Law, it should be incorporated with a minimum paid-up capital of Rs 5 Lakhs but considering further practicalities, it should be incorporated with an

  • Authorized and paid-up Capital of minimum Rs 10 Lakhs.
  • Minimum number of members should be seven and directors three.
  • Only an Individual can become a member of Nidhi Company.
  • PAN and Aadhar should be a mandatory document for a member.
  • It should have a minimum of 200 members in the first financial years and where applicable second financial year. For instance, a company is incorporated in December, then the time limit for 200 members is 31st March of next year. But, in case a company is unable to fulfil the minimum member's requirement, then it can apply to a Regional Director for extension of the time limit in NDH-2 with reasonable grounds and RD if satisfied, it will grant an extension of one more year. i.e. the second financial year.

Works which can be done by Nidhi Companies include accepting deposits and lending among members, opening Savings Account, Fixed Deposits, Recurring Deposits etc. It can also provide locker facilities but the Income from locker rent should not more than 20% of its Total Income.

Brief about Nidhi Company


Nidhi Company can take deposits for a minimum of 6 months and a maximum of 5 years

  1. Savings Account: It can hold any amount of money in its member's saving account, but interest shall be paid only on Rs one lakh. The rate of Interest for saving account shall be the rate prescribed by RBI +2%.
  2. Fixed Deposits
  3. Recurring Deposits

Deposits from Member

Loan to Member

Less than 2 Cr

2 Lakhs

2-20 Cr

7.5 Lakhs

20-50 Cr

12 Lakhs

More than 50 Cr

15 Lakhs


Gold, Silver and Jewellery, Immovable Property, NSC, FD, Insurance (only term)


It should not open a branch for 3 years from its incorporation. A branch can be opened only if the company is regularly earning profits for 3 years.

It can open only 3 branches in a District.

Closure of Branch should not be done unless- An advertisement is made in a local and vernacular language at least 30 days prior to the closure. It should disseminate the information regarding loans, deposits etc,

And an intimation should be made with ROC for the closure of the Branch in GNL Form since no form is prescribed.

  • On Right Issue, Co's Act is not applicable, A Nidhi Company can issue any number of shares to any of its members.
  • Directors of a Nidhi Company can hold office up to a term of ten years then cooling period should be two years.

Compliance Calendar

  • NDH-1: Return of Statutory Compliance within 90 days from the ending of the first Financial Year. (Four mandatory Compliances)
  • NDH-2: For extension of the time limit. (with Board Resolution and petition)
  • NDH-3: Half Yearly Return every 30th September and 31st March.
  • NDH-4: Declaration as Nidhi Company.

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Category Corporate Law, Other Articles by - CS Rashi Jain