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The word "Nidhi" from a root word traditionally meaning "Treasure" They are created primarily for the motive of cultivating the habit of thrift and savings among their members.

The Central Government vide Notification No.5/7/2000-CL.V dated 23rd March 2000 constituted a Committee i.e. Sabanayagam Committee on Nidhi To examine the various aspects of the functioning of Nidhi Companies. The Committee suggested the following definition for Nidhi:

"Nidhi is a company with the exclusive object of cultivating the habit of thrift, savings and functioning for the mutual benefit of members by receiving deposits only from individuals who enroll as members and by lending only to individuals, also enrolled as members, and which functions as per Notification and Guidelines by the DCA. The word Nidhi shall not form part of the name of any company, firm or individual engaged in borrowing and lending money without incorporation by DCA and such contravention will attract penal action." A part of this definition appears in the new Companies Bill 2012 in Section 406.

Before starting with the topic let us understand the meaning of the 'Nidhi Company'

Sub-Section 1 of Section 406 of Companies Act, 2013 defines Nidhi as follows: 

"Nidhi means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings among its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with such rules as are prescribed by the Central Government for the regulation of such class of Companies."

Nidhi Company can borrow from members and lending to members only and Nidhi company also known as Mutual Benefit Funds, Mutual Benefit Society, and Mutual Benefit Company. Nidhis are more popular in South India. Membership of Nidhi company is limited to individuals. The main source of funds is the contribution from the members. The deposits mobilized by Nidhi are not much when compared to the organized banking sector. The level of complexity as compared to other types of finance companies like NBFC is minimal in Nidhi Company.

No RBI Approval Required:

Nidhi Company by its nature of activity comes under the category of NBFC but does not require RBI approval. As per Sections 45-IA, 45-IB and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934) shall not apply to any non-banking financial company which is a mutual benefit company or Nidhi Company.

Annual And Half Yearly Compliances For Nidhi Companies

NDH-1: Return of Statutory Compliances (Yearly)

Nidhi shall file a return of statutory compliances in Form NDH–1 within 90 days from the closure of the financial year with the Registrar duly certified by a Company Secretary in practice or a Chartered Accountant in practice or a Cost Accountant in practice. (ROC Form NDH-1 Require to File)

NDH-2: Apply To The Regional Director For Extension Of Time

If the company is not complying with the minimum member criteria and ratio of Net Owned Funds to deposits in that case company shall within 90 days from the close of the first financial year, apply to the Regional Director in Form NDH -2 for extension of time and the Regional Director may consider the application and pass orders within 30 days of the receipt of the application. (ROC Form NDH-2 Require to File)

Compliances and rules for Nidhi Companies

NDH-3: Half Yearly Return With The Registrar

Nidhi has to file form NDH-3 within 30 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. (ROC Form NDH-3 Require to File)

NDH-4: Form for filing application for a declaration as Nidhi Company and for updation of status by Nidhi

The due date for filing of ROC Form NDH-4 are as follows:



Due date

For every new Nidhi Company – Due date for filing of Form NDH-4 by the Nidhi incorporated under the Act on or after 1st July, 2019

Within 60 days after the expiry of 1 year from the date of its incorporation or the period up to which extension of time has been granted by the Regional Director.

Due date for filing of Form NDH-4 by every existing Nidhi company incorporated before 1st July, 2019

Within a period of 1 year from its date of incorporation OR within a period of 6 months from the date of commencement of Nidhi rules 2019 , whichever is later.

Due date for filing of Form NDH-4 by Companies declared as Nidhi under previous Company Law

Within a period of 6 months from the date of commencement of Nidhi (Amendment) Rules, 2019 .

In case failure to file form NDH-4, Companies shall not be allowed to file Form No.SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of Allotment).

Form AOC-4: Filing of Financial Statements

Every Nidhi company is required to file its Financial Statements, along with Notice calling General Meeting, Directors Report, Auditors Report, Cash Flow Statement, Balance sheet and Notes to Accounts to ROC within 30 days from the date of Annual General Meeting.

Form MGT-7: Filing Annual Return

Every Nidhi company is required to file its Annual Return along with List of members of within 60 days from date of the Annual General Meeting.


Form MGT-14 Reporting of Resolutions:

As Nidhi Company is required to File Form MGT-14 for Approval of Financial Statements and Directors Report and Disclosure of Director's interest.

Rule 4 Conditions For Incorporation As Nidhi Company

1. It shall have a minimum paid-up equity share capital of five lakh rupees.

2. No Nidhi Co. can issue preference shares to its members.

3. Objects in MOA other than the objects of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefits, are void.


4. Every Nidhi shall have the last words as "Nidhi Limited."

Rule 5 Requirements For Minimum Number of Members, Net Owned Fund Etc.

Every Nidhi shall, within a period of one year from the commencement of these rules, ensure that it has-

(a) not less than two hundred members;

(b) Net Owned Funds of ten lakh rupees or more;

(c) unencumbered term deposits of not less than ten per cent of the outstanding deposits as specified in rule 14; and

(d) ratio of Net Owned Funds to deposits of not more than 1:20

Rule 6 General Restrictions Or Prohibitions

No Nidhi shall -

Carry on the business of chit fund, hire purchase, finance, leasing finance, insurance or acquisition of securities issued by any body corporate.

Issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever.

Open any current account with its members, 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 any body 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 for granting loans, Carry on any business other than the business of borrowing or lending in its own name.

Rule 7 Share Capital And Allotment

Every Nidhi Company shall issue equity shares of the nominal value of not less than ten rupees each.

No service charge shall be levied for issue of shares.

Every Nidhi shall allot to each deposit holder at least a minimum of ten equity shares or shares equivalent to one hundred rupees: It may be noted that a savings account holder and a recurring deposit account holder shall hold at least one equity share of rupees ten.

Rule 8 Membership

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

Members shall not reduced to less than two hundred at any point of time.

A minor shall not be admitted as a member of Nidhi. Provided that deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.

Rule 11 Acceptance of deposits by Nidhi

A Nidhi shall not accept deposits exceeding twenty times of its Net Owned Funds (NOF) as per its last audited financial statements.

Rule 13 Deposits

The Fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of 60 months.

Recurring deposits- minimum period: 12 months maximum period 60 months

The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed one lakh rupees at any point of time, and the rate of interest shall not exceed 2% of the rate of interest payable on savings bank account by nationalized banks.

A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding the maximum rate of interest prescribed by the Reserve Bank of India which the Non-Banking Financial Companies can pay on their public deposits.

Rule 15 & 16 Loans And Rate Of Interest

Loans are permitted against following security to members only:

1) Gold/Jewellery/Silver

2) Fixed Deposit

3) Property

4) NSC,Other Govt Securities

5) Insurance Policy

The rate of interest to be charge on any loan given by a Nidhi shall not exceed 7.5% above the highest rate of interest offered on deposits by Nidhi and Interest charged on loan amount is on reducing balance method.

The Loan given by Nidhi to a member against deposit made:


Maximum Loan Amount

Less than 2 Crore

2 Lakh

More than 2 Crore but Less than 20 Crore

7.5 Lakh

More than 20 crore but Less than 50 crore

12 Lakh

More than 50 Crore

15 Lakh

Rule 17 Relating of Directors

The director of the Nidhi shall be a Member of Nidhi and shall hold office for a term up to 10 consecutive years. And shall be eligible for re-appointment only after expiration of 2 years of such cessation and has to comply with Section 152(4) and 164 of the Companies Act, 2013.

Where the Central Government in any case had already extended the tenure of any director, it shall terminate on expiry of such extended tenure.

Rule 19 Auditors

No Nidhi shall appoint or re-appoint an individual as auditor for more than one term of five consecutive years.

No Nidhi shall appoint or re-appoint an audit firm as auditor for more than two terms of five consecutive years;

Provided that an auditor (whether an individual or an audit firm) shall be eligible for subsequent appointment after the expiration of two years from the completion of his or its term.

Exemptions to Nidhi Company (Ministry of Corporate Affairs issued a Notification on 5th June, 2015)

Following sections of the Companies Act, 2013 where exemption is granted to Nidhi: –

  • Sub-section 2 of Section 20,
  • Section 42
  • Clause (b) of Sub-section 1 of Section 47
  • Section 62
  • Sub-section 1 of Section 67
  • Sub-Section 5 of Section 123
  • Section 127
  • Sub-Section 1 of Section 136
  • Section 160
  • Section 185
  • Sub-section 1 of Section 197
  • Section 403

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