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What is a Nidhi company?



Nidhi Company is a company registered under Companies Act and notified as a Nidhi company by Central Government under Section 406 of Companies Act, 2013. It is a type of non-banking finance company a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members. It functions by 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.

Nidhi Company is a type of Non-Banking Financial company (NBFC) registered under Companies Act and notified as a Nidhi company by Central Government under Section 406 of Companies Act, 2013. This form of Company is opted for the sole purpose of receiving deposits and lending between their members only, for their mutual benefit.

Although Nidhi Company is a NBFC however Reserve Bank of India vide Exemption Notification No. DNBS.(PD).CC.No. 12 /02.01/99-2000 has exempted Nidhi Companies to comply with the regulations of NBFC. The notification can be read in detail on:,control%2Fmanagement%20of%20the%20company )

Therefore, one who wants to enter into Microfinance Banking business without complying the provisions of NBFC as specified by RBI one can incorporate Nidhi Company. However, there are other provisions which are applicable on Nidhi Company as provided in The Companies Act, 213 and Nidhi Rules, 2014.


In order to incorporate A Nidhi Company, one has to follow the procedure given by The Ministry of Corporate Affairs in accordance with The Companies Act, 2013.

  • Step 1: Consent of Directors and Members

Get consent of all the subscribers to become member and Director of the company who are willing to incorporate the company. The person who are becoming the Director of the company (if Individual) shall be Member of the company.

  • Step 2: Check the name Availability

Name of a Nidhi Company shall end with “Nidhi Limited’. For e.g. ABC Nidhi Limited. Check the name Availability for the proposed company. Rule 8 and 8A of The Companies (Incorporation) Rules, 2014 shall be abided while checking the name of the company. You will need professional expertise to check the name as there are several complexities while doing the same.

  • Step 3: Apply for DSC

The Digital Signature Certificates (DSC) of all the subscribers and Directors of the proposed Company shall be applied and necessary verification should be done by the applicant.

  • Step 4: Completion of Documentation:

Set of documents need to be prepared which will be filed with the Registrar of Company, Central Registry Centre.

  • Step 5: Filing for Forms:

Incorporation Forms such as SPICe PLUS, eMOA, eAOA, etc. will be filed with Ministry of Corporate Affairs. In the MOA the only object should be of cultivating the habit of thrift and saving amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit,

  • Step 6: Final Approval:

If all the documents filed are complete and correct in all respect then the Ministry shall approve the company and the Certificate of Incorporation along with other documents will be issued. PAN and TAN will be simultaneously generated at the time of Incorporation.


  • Digital Signatures of all Directors and Subscribers
  • DIN No. for all Directors (If already allotted, otherwise it can be allotted later on)
  • Identity Proofs for all the Directors and Subscribers (PAN Card)
  • Address Proof of all the Directors and Subscribers (e.g. Aadhaar, Bank Statement)
  • Photograph of all the Directors and Subscribers
  • Any Utility Bill as Address Proof of Registered office of the company
  • If Registered Office is Rented, No Objection Certificate/ Rent Deed from the owner of the Property
  • Other documents as prepared by the Professional


  • Easy Incorporation in comparison to other forms of NBFC’s.
  • No RBI Compliance only Nidhi Rules, 2014 and other provisions of The Companies Act, 2013 is required to be complied
  • Low capital requirement in comparison of other NBFC’s the capital requirement is just 500000.
  • Closed Management No External Involvement in the Company’s Management;
  • Easy lending and borrowing between the members
  • Substitute of a Co-operative Society and Micro Finance Business with additional benefits
  • Registration under Ministry of Corporate Affairs hence many privileges and exemptions are provided under the provisions of the Companies Act, 2013 and they also enjoy status of a separate legal entity.
  • Access to public funds only requirement is that any lending or borrowing should be done with members only.
  • Secured investment with lower Rate of Interest hence Lower level of risk
  • Financial help to Common group people by Fulfilling the financial requirements of the lower and middle-income groups though their easy lending and borrowing mechanism.

Characteristics of Nidhi Company

Some of the important points to be kept in mind regarding Nidhi Company:

  • A Nidhi Company can only be incorporated under the Act as a public company and shall have a minimum paid up equity share capital of five lakh rupees.
  • Minimum of seven members is required to start a Nidhi Company out of which three members must be the directors of the company.
  • Every Company incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.
  • A Nidhi cannot admit a body corporate or trust as a member.
  • A minor cannot be admitted as a member of Nidhi Company
  • All the Director shall be a member of Nidhi Company
  • Nidhi Company can’t deal with chit funds, hire-purchase finance, leasing finance, insurance or securities business.
  • It is strictly prohibited from accepting deposits from or lending funds to, any other person except members.
  • An approval is required from MCA for formation of a Nidhi company


Once incorporated, a Nidhi company is required to fulfill the following requirements within 1 year of its registrations:   

  • Nidhi Company should have minimum 200 members within one year from commencement
  • The net owned funds should be 10 lakh rupees or more. Net owned funds = Equity share capital + free reserves (-) accumulated losses (-) intangible assets
  • Unencumbered term deposits must be 10% or higher of the outstanding deposits
  • The ratio of net owned funds to deposits shouldn’t be more than 1:20

If Nidhi Company satisfies all above conditions, it should file NDH-1 along with prescribed fees within 90 days from the end of the first financial year after incorporation. The form must be duly certified by practicing CA/ CS/ CWA.

Extension of another financial year can be availed upon submission of NDH-2 to the Regional Director within 30 days from the end of the first financial year.

If even after the second financial year, it doesn’t fulfill the requirements, it can’t accept deposits till it complies with the provisions, and also penalty will be imposed.