Nidhi Company

  • Nidhi Company has been taken from the Hindi word ‘Nidhi’ means treasure.
  • Nidhi Company follows Companies Act, 2013. These companies are mainly formed for savings.
  • Nidhi companies are also called the mutual benefit society.
  • Nidhi Company creates the habit of thrift and savings amongst its members.
  • Members can receive deposits and they can lend as well for their mutual benefit.
  • These companies are considered as the secured means of investment.
  • There are provisions for loans in the Ordinary Course of Business but the amount of interest on such loan shall be at least the rate of interest prescribed by RBI.
  • In some cases, the guarantee is given by company against the loan taken by its Subsidiary Company from the bank or financial institutions.
  • Nidhi Company to be incorporated Under the Act shall be a Public company.
  • Minimum paid up equity share capital of Rs.500000.
  • Minimum numbers of members should be Seven.
  • Preference shares shall be issued.
  • It shall have the word “Nidhi Limited” as part of its name.
  • After one year of commencement of these rules ensure that company has minimum number of members should be 200.

Nidhi Company Benefits:


Nidhi Company Overview:

Dear my all friend today we going to discuss about Nidhi company

Business of finance without being registered anywhere, due to this, they have to either close down their business or face the many people in India do the penal consequence of law. The main reason behind being unregistered is the cost and time involved in the registration.

In India, only banks and Non-Banking Financial Companies (NBFC) are allowed to do business of finance. Unlike Banks, NBFC requires lesser capital to start with but that too is large for a small business man. The minimum capital requirement for NBFC is Two crore.  Other than capital, there are various other restrictions as well like stringent regulations, capital adequacy norms, Provisioning norms etc.

Nidhi Business: Nidhi (Mutual Benefit Society)

 If you would like to begin your business in funding industries, then it’s the most effective vehicle to kick starter your set up. The Nidhi Company comes underneath the broad class of NBFCs (Non-banking monetary Companies), however it’s exempted from rigorous regulative compliances that otherwise you have got to follow if you begin NBFCs. it’s helpful to lift cash among tightly-knit teams.

Since Nidhi Company offers a loan to its members, as long as members offer some type securities like Gold, silver, jeweler, properties or any style of monetary securities e.g. FD receipts, National Saving Certificates (NSCs) etc., thus this mechanism protects the chance if some members fail to pay back cash borrowed.

A  Nidhi will  conduct  business solely  if  they  have  deposits  with  whose cash  loans are  granted. thus  the  interest  of depositors ought to  be unbroken  in  mind  and lawfully  they  should  have  a  say  in  the  management  of  the  Nidhi.

The  promoters UN agency  establishes  a  Nidhi  and  on  account  of  whose name  and  effort  deposits are  mobilized ought to additionally  have  a  say  in  the  management  of  the  Nidhi.  There is a agreement  in  the  country  that  women UN agency  have therefore way  been sidelined  in  spheres  of development ought to  be  given  adequate illustration. It’s additionally necessary to make sure that unconditional interests aren’t allowed to dominate.

Nidhi Business or Nidhi Company

The word “Nidhi” in Nidhi Company comes from a descriptor traditionally which implies “treasure”. In its newer context inside the Indian financial sector it refers to any mutual profit society notified by the Central / Union Government as a Nidhi Company.

The companies doing Nidhi business, viz. borrowing from members and disposition to members entirely, and area unit acknowledged beneath utterly completely different names like Nidhi, Permanent Fund, and profit Funds, Mutual profit Funds and Mutual profit Company.

Nidhi area unit further in vogue in South Republic of Republic of India and area unit extraordinarily localized single geographical point institutions. They’re mutual profit societies, as a result of their dealings is restricted entirely to the members; and membership is out to individuals.

The principal provider of funds is that the contribution from the members. The loans area unit given to the members at relatively low cost rates for functions like house construction or repairs and area unit typically secured. The deposits mobilized by Nidhi do not appear to be lots of compared to the organized banking sector.


“Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst 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 regulation of such class of companies.[Section 406]


According to Rule 4 of Nidhi Rules, 2014; a Nidhi Company shall be a public company and must have a minimum paid up equity share capital of five lakh rupees. The Nidhi Company shall have only one object in its memorandum that is of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit. Every Company incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.


Rule 5 say, 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.


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

The process of incorporation of a Nidhi company is same as of incorporation of a public company limited by


 Loans & Directors

 Relevant rules in the Nidhi Rules, 2014 as under:-


  • A Nidhi shall provide loans only to its members.
  • For the purposes of sub-rule (2), the amount of deposits shall be calculated on the basis of the last audited annual financial statements.
  • A Nidhi shall give loans to its members only against the following securities, namely:-
    • Gold, Silver and Jewellery
    • Immovable Property
    • Fixed Deposit receipts, National Savings Certificates, other Government Securities and
    • Insurance Policies


  • The Director shall be a member of Nidhi.
  • The Director of a Nidhi shall hold office for a term up to ten consecutive years on the Board of Nidhi.
  • The Director shall be eligible for re-appointment only after the expiration of two years of ceasing to be a Director.
  • The person to be appointed as a Director shall comply with the requirements of subsection (4) of section 152 of the Act and shall not have been disqualified from appointment as provided in section 164 of the Act.


Branches of Nidhi Companies


A Nidhi Company has to satisfy certain criteria as provided by MCA to open branches which are as


  • Nidhi Company may open up to three branches within a revenue district if it has earned a profit for last three continuous years;
  • Nidhi Company may open beyond three branches outside the revenue district subject to above condition and prior permission of MCA; and
  • Nidhi Company can’t open branches or collection centres or offices or deposit centres, by whatever name called, outside the state of its Registered Office.


Non-Permissible activities for Nidhi Companies


Pursuant to Notifications GSR 555 (E) dated July 26, 2011 and GSR 308 (E) dated April 30, 2002, MCA directed Nidhi Companies to not carry out certain activities such as:-

(i) Carrying on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of shares or debentures issued by any body corporate except the shares of another Nidhi Company, if specifically permitted by MCA;

(ii) Opening any new current account with its members;

(iii) Admitting as member, any body corporate or trust;

(iv) Issuing any equity share of nominal value less than rupees 10/- except in case of Nidhi Companies incorporated on and after July 26, 2001:

(v) Levying service charge for issue of shares to members;

(vi) Making any preferential allotment of shares to any persons or group of persons but shall make only rights issue of shares and the unsubscribed portion can be apportioned by the Board of Directors in terms of Section 81 of the Companies Act, 1956;

Provided that this restriction shall not apply to allotment of shares up to the face value of

Rs.100/- to new deposit holders or borrowers and in respect of qualification shares held by Directors.


(vii) Acquiring another company by purchase of shares or control of composition of Board of Directors otherwise than through amalgamation or merger under the Act and subject to the regulations applicable to Nidhi Companies in force;

(viii) Carrying on any business other than the business of borrowing or lending in its own name and allow use of its name by any other body corporate whose main object is to earn profit by borrowing and lending;

(ix) Entering into any financial dealing with any person other than its members;

(x) Pledging any type of security lodged with it by its members;

(xi) Taking further deposits from or lends further money to any body corporate;

(xii) Entering into any partnership arrangement in its borrowing or lending activities;

(xiii) Issuing or causing issuance of any advertisement in any form for soliciting deposit. However, Private circulation of the details of fixed deposit schemes among the members shall not be considered to be “advertisement” inviting deposits;

(xiv) Paying any brokerage or incentive for mobilizing deposits from members or for deployment of funds or for granting loans;

(xv) Issuing prepaid interest warrant; and

(xvi) Entering into any arrangement for the change of its management without a special resolution passed in its general meeting and approval of MCA.

Basics of Nidhi Company

Before we explain the process of registration, you must understand the basic of Nidhi Company:

1. Nidhi Company is also called a Mutual Benefit company. It promotes the art of saving and utilization of funds within its member community.

2. Nidhi Company cannot deal with anybody other than its members. You will have to understand the process of making a making in a Nidhi.

3. The minimum capital requirement for Nidhi Company is five lacs with at least seven members needed to incorporate a company.

4. Anybody can register a Nidhi Company; there is no background check, nor there did any prescribe qualification for its owners.