Nidhi Company

Nidhi Company is a type of Non-Banking Financial Company (NBFC). It 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. These companies typically operate in the southern part of the country.

Nidhi Company isn’t required to receive the license from Reserve Bank of India (RBI), hence it is easy to form.

It is registered as a public company and should have “Nidhi Limited” as the last words of its name.


Limited RBI Regulations:

Owing to their non-dealing with the funds of any person other than their members, the regulations imposed upon the Nidhi’s by RBI is limited. These companies follow the Nidhi Rules, 2014 issued by the center in respect of the activities and workings of Nidhi Companies.

Limited Capital Requirement:

The Ministry of Corporate Affairs has done away with the minimum capital requirement of INR 5 Lakhs for Nidhis. It is only after Nidhi Rules, 2014, that mandated the infusion of INR 10 lakhs for such companies.

Ease of formation:

Unlike other NBFCs, Nidhis don’t have to obtain a license from RBI. They just have to incorporate themselves as a public company with the MCA, infuse the required amount of capital as per Nidhi Rules, 2014 and they are all set to go.

Help in channelizing small savings:

The main aim of such companies is to promote the habit of saving and thrifts among lower and middle section of the society. These small sections of the population contribute to the funds of and avail credit from Nidhi Companies.

The lower rate of credit:

The loans given to the members are at a lower rate of interest than the market rate. This brings greater savings to the members.

No outsider intervention:

The Nidhi companies are formed by, managed by, and provide benefits to their members only. The outsider is not allowed to intervene in the working of the Nidhis, neither allowed to deposit money or avail credit from these Companies.

Disadvantages :

Limited Fund Raising:

Since the Nidhi Companies accept deposits from their members only, the funds raised are limited in accordance with the number of members.

Limited credit availability:

When the funds raised are limited, the availability of credit is also restricted. This defeats the whole purpose for which the Nidhi Companies are established.

Falls under RBI vigilance:

Although there are no strict compliances imposed upon the Nidhis by RBI, still their activities are governed by the Reserve Bank especially their deposit acceptance operations.

Other Regulations:

The central government issues rules and directions governing Nidhi Companies from time to time. Therefore, they are not totally exempt from the regulatory frameworks.

The financial market is very vast in India. The financial needs are also continuously increasing. In such scenario, NBFCs are playing a prime role in the sector and the Nidhi Companies are the important branch of it. Although their coverage is limited, their influence is quite significant for the middle class.

Minimum Requirements for Nidhi Company :

Pre-Registration Requirements for Nidhi Company
  • Minimum 7 Members;
  • Minimum 3 Directors;
  • No Minimum Capital Requirement;
  • No Preference Shares allowed to issue;
  • The object of the company shall be receiving deposits from and lending to its members only for their mutual benifits.
Post-Registration Requirements for Nidhi Company
  • Minimum 200 Members within 12 months of registration

A Nidhi company must add at least 200 members to comply with this requirement of law. Further, it has to maintain this during the course of time. If the total members falls less than 200 at anytime thereafter, it will leave the company at default. However, if you are not able to reach the limit of 200 members, then you must apply for time within 30 days of closure of financial year in Form NDH-2 with Regional Director, Ministry of Corporate Affairs.

  • Minimum Net Owned Fund (Paid Up Share Capital + Free Reserves) of 10 lakh or more
  • Unencumbered term deposits of not less than 10% of the outstanding
  • A Nidhi Company shall not admit a body corporate, trust or minor as a
  • Net owned funds to Deposits should be 1:20 if you have net owned funds of 10 lakh, then your total deposit limit would be INR 2 lakhs.

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