A Nidhi company is one that belongs to the non-banking Indian Finance sector and is recognized under section 406 of the Companies Act, 2013. Their core business is borrowing and lending money only between their members.
They are also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company. It is regulated by Ministry of Corporate Affairs. Reserve Bank of India is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these Nidhi Company deal with their shareholder members only.
Nidhi Companies were existed even prior to the existence of companies Act 1913. The basic concept of Nidhi is “Principle of Mutuality” (“Paraspara Sahayata”). Thus Nidhi function for the common benefit advantage of all their Members/Share holders..