A Nidhi Company is a type of Non-Banking Financial Company (NBFC) incorporated with the core objective of borrowing and lending money exclusively among its members. It operates on the principle of mutual benefit, encouraging savings and financial discipline among its members.

The term “Nidhi” means “Treasure”—symbolizing its role in accumulating and distributing wealth within a closed group. Nidhi Companies are especially popular in South India and are registered under the Companies Act, 2013 and governed by the Nidhi Rules, 2014.

Unlike other NBFCs, Nidhi Companies do not require a license from the Reserve Bank of India (RBI) to operate. However, they must comply with certain RBI guidelines applicable to NBFCs.

 

Why Register a Nidhi Company?

Registering a company as a Nidhi has multiple strategic benefits:

1. Internal Lending Structure: The company operates solely among its members—borrowing from and lending to them—thus building a trusted, low-risk financial system.
2. No RBI License Required: Nidhi Companies are exempt from core RBI provisions, making incorporation and management easier than other NBFCs.
3. Promotes Savings Habit: These companies are built to encourage regular savings and thrift among lower and middle-income groups.
4. Public Company Status: Nidhi Companies are incorporated as public companies and must include “Nidhi Limited” at the end of their name.

 

Benefits of Registering a Nidhi Company

1. Simple Incorporation

• Requires only 7 members (with 3 as directors).

• Involves minimal paperwork and simpler regulatory formalities compared to other financial entities.

2. Low Operational Risk

• Operations are restricted to members only, reducing exposure to defaults and external risks.

• Ensures greater financial discipline and lower non-repayment incidents.

3. Mutual Growth

• Members mutually benefit through low-interest loans and return on deposits.

• Encourages community-based financial empowerment.

4. Minimal Capital Requirement

• Only ₹5,00,000 required as minimum capital.

• Significantly lower compared to other NBFCs, making it ideal for small and medium enterprises.

5. Autonomous Operations

• Since it operates exclusively among members, external interference is minimal.

• No outside investors or creditors are involved in its functioning.

6. Exemptions under Companies Act, 2013

• Can conduct private placements without it being treated as a public offer.

• Flexible communication methods for serving documents to members.

• Fewer compliances in comparison to standard NBFCs.

7. Member-Centric Benefits

• Easy access to credit with low interest rates.

• Acts as a financial safety net for members in the long run.

 

Service Overview: Key Features of a Nidhi Company

• Can accept Fixed Deposits (FDs), Recurring Deposits (RDs), and Savings Deposits.

• Can offer loans only against security (e.g., gold, property, etc.).

• Interest on loans capped at a maximum of 12.5%.

• Cannot:

  • Accept deposits from outsiders or corporations.

  • Engage in vehicle financing, chit funds, leasing, or hire purchase.

• Initially limited to operations within one district for the first 3 years; may expand further within the same district after that.

 

Compliance Requirements

Within 12 months of incorporation, the company must:

• Have at least 200 members.

• Maintain a net-owned funds to deposit ratio of 1:20.

• Hold unencumbered term deposits equal to 10% of total outstanding deposits.

Upon meeting the above, the company must:

• File NDH-1 (certified by a practicing CA/CS/CMA) within 90 days of the financial year’s close.

• If unable to comply, apply to the Regional Director for an extension within 30 days.

 

Failure to comply after two financial years may lead to penalties as per the applicable law.

Procedure for Nidhi Company Registration

1. Minimum Requirements:

   • 7 Members and 3 Directors (all individuals).

2. Obtain DIN & DSC for the proposed directors.
3. Reserve Company Name through Form INC-1 on the MCA portal.
4. Draft MOA & AOA with objectives and rules of the company.
5. File Incorporation Forms and obtain Certificate of Incorporation.
6. Apply for PAN & TAN post-registration.

Documents Required for Registration

1. Photographs of all directors and members.
2. ID Proof (Aadhar Card, PAN Card, Voter ID, etc.)
3. Address Proof (Utility bill or similar, not older than 2 months).
4. Registered Office Address Proof:

   • Ownership proof (Property document) or

   • Rent agreement + NOC from landlord.

5. Memorandum of Association (MOA) and Articles of Association (AOA).
6. Digital Signature Certificates (DSC) of all directors.
7. Proof of director’s qualifications (if applicable).