Nidhi Company in India: Process, Eligibility and Benefits

Nidhi is a type of company that belongs to the non-banking financial sector of the economy and hence has to follow the RBI guidelines. The primary activity of such companies is to borrow and lend money to the members of the company itself.

When you want to open a financial company, you have two options either to open a Non-Banking Financial Company(NBFC) or go for Banking Company. These both companies are limited and are governed by RBI.

The only exception is a few NBFC's such as Chit fund companies and Nidhi Company that are exempted from the governance of RBI directly.

What is Nidhi Company and How does it work?

Nidhi is an Indian word that means 'Treasure', however, as per the financial sector of our economy, it refers to mutually benefit society that is registered and notified by the central government as Nidhi Company.

Any Nidhi company in India requires registration through MCA, and they do not have a requirement of obtaining approval or license from RBI.

Nidhi companies in India provide the most effective and most accessible solution for making savings which is not possible through savings in the banks. The working structure of NIDHI company is that it takes the contribution of funds from its members who receive a set returns after an interval of fixed duration.

Features of Nidhi Company

Nidhi company has the following key features:

Promotes Savings

The objective of a Nidhi Company is to accept deposit and provide loans to its members only. The company promotes small savings among the middle and lower middle class in India. The companies are cultivated with the primary aim of fostering small savings.

Source of Loan

Is an effective and easiest means of loan against collateral. The requirement for documentation is very low as the loans are granted to the member of the company only.

Minimum Requirement

Minimum paid-up share capital requirement for a company is 5 lakh rupees, and the number of members in the company can be 200. All the Nidhi company in India needs to be registered as a Public company, and if the company meets all these basic requirements only then, they can register it as Nidhi company in India.

Secured Investment

The membership structure of the company is very rigid, and hence the investment is very secured. The money is raised between a tightly-Knit group of people which reduces the likeliness of people losing their investment.

Who has the Authority to Regulate Nidhi Company in India?

Nidhi companies are considered NBFC's but are not regulated by RBI; they just have to follow the guidelines laid down by it. The regulating body for a Nidhi company is Ministry of Corporate Affairs (MCA), and the rules and regulations have been laid down in Nidhi Rules, 2014.

RBI Guidelines for Nidhi Company

Nidhi Company and Chit fund companies are the only NBFC companies that have no obligation to obtain a license from RBI to begin operating. They have to follow all the rules and regulations mentioned in the Nidhi Rules, 2014.

Unlike other NBFC's they have less procedural compliance as the company deals with only the members of the company and non-members cannot either provide funds or take loans from the company.

Requirements for Nidhi Company

The Nidhi company in India is required to complete the following mandatory requirement before and after the incorporation of the company:

Mandatory Requirement before Incorporation:

  • The company should be registered as a public company with a minimum paid up equity share of 5 lakh.
  • The company should not issue any preference shares
  • The company should have 'Nidhi limited' as a prefix
  • The company should mandatorily have 7 shareholders and 3 directors.

Mandatory Requirement after Incorporation:

Every Nidhi company after completing 1 year of incorporation have to ensure the following :

  • The company should have a minimum of 200 members
  • the net owned funds of the company should not be less than 10 lakh rupees.
  • The ratio of Net owned Funds and deposit should not exceed 1:20
  • The 10% of its profit in a commercial bank as a fixed deposit

Documents Required for Nidhi Company

Address Proof

Identity Proof

Identity Proof

Address Proof

Registered Office



Office Proof

Following documents are must if anyone wants to form a Nidhi company in India:

Proof of Identity

Identity proof of the directors and shareholders is required to be submitted along with the incorporation form. Following documents are accepted as identity proof

  • Voter ID
  • Aadhar Card
  • Driving License
  • Passport

Address Proof

The proposed directors and shareholders of the Nidhi company have to submit following documents that are recognised as address proof:

  • Bank Statement
  • Electricity Bill
  • Mobile Bill
  • Telephone Bill

Passport Size Photograph

Two recent photographs of the promoters which should not be more than 6 months old.

Registered Office Proof

Following documents are required as registered office proof :

If the premises are owned:

  • Electricity Bill
  • Ownership Documents (Sale Deed)

If  the premise is rented:

  • Rent Agreement
  • Non-Objection Certificate(NOC)

PAN Card of all the directors

The PAN card copy for all the directors and shareholders should be

How to Incorporate Nidhi Company in India?

Like other companies, Nidhi company can be incorporated by filing an online application with MCA. A Nidhi company has to be incorporated as a public company with a minimum paid up equity share capital of five lakh rupees.

The complete Registration Process for Nidhi Company takes upto 40 to 45 working days the entire process is as follows:

Step - 1 Obtaining DIN and DSC

All the proposed and existing directors required to apply for DSC and DIN through E-form with MCA. It is a necessary requirement to initiate the registration procedure as all the forms are to be self-attested. There is a minimum of 3 directors necessary for incorporation of Nidhi Company.

Note: Members and Directors in a Nidhi Company can be the same.

Step - 2 Company Name Approval

A company name should be unique; it should not be similar to any trademark or any other company name. The name can be reserved through a RUN facility that is available online.

Pro Tip: It is essential for your Nidhi company should include the word Nidhi Limited in its name.

Step - 3 Submission of Application

Draft of MOA and AOA is to be prepared for the company that is to be incorporated. The application for PAN and TAN is made with form SPICe 32 in the prescribed manner along with all the required documents.

Remember: The company object in MOA should not at any time contain anything that is other than promoting Savings and lending activity. Learn more about how to draft a perfect MOA here.

Step - 4 Certificate of Incorporation

Once the incorporation application is accepted and duly verified it will receive government approval and an incorporation certificate will be mailed to you on your company mail ID.

Note: Once the company has obtained an incorporation certificate from MCA they can open a bank account using the PAN and TAN of the company.

Restriction Imposed on Nidhi Companies

Nidhi company is also commonly known as mutual benefit society that is regulated by provisions of the companies act,2013. The rules also impose a specific restriction upon the companies which the companies at any time of operations should not go against.

General Restrictions for Nidhi Company

A Nidhi Company is prohibited from carrying out the following activities:

  • The company is not permitted from opening a current account with its members.
  • No Nidhi company can acquire any company by purchasing securities or by taking control of the Board of directors.
  • A Nidhi company cannot enter into any arrangement for changing its management unless the special resolution is passed and approval from regional director has been obtained.
  • A Nidhi company cannot accept a body corporate or any trust as a member of the company.
  • The company is exempted from carrying on the business of Chit Fund, leasing and finance, insurance and acquisition of securities that are issued by a body corporate.
  • Enter into a partnership agreement that is in borrowing or lending
  • Accept deposits or lend to any person other than its members.

Advantages of Nidhi Company

Every company type that is incorporated has its advantages and disadvantages. Following are some of the advantages of registering a Nidhi Company in India.

Loans and Nidhi Company

Nidhi company can provide loan facility to its members only. The said restriction has been imposed on providing loans against the mentioned securities only; the securities include gold, Jewellery, silver and immovable property. The repayment of loan has to be made within 1 year of taking the loan.

Rate of Interest

The rate of interest for such loans cannot exceed 7.5%  for all the classes of loans. The rate of interest for every class of loans should be appropriately displayed on the notice board of the company (Registered office and Brach of Nidhi Company).

Encourages Thrift Saving

Nidhi companies function based on the principle of savings and lending among the member of the company. The company was introduced to see that the lower middle class is saved from the clutches of money lenders. The company follows the principle of mutual benefit.


Limitation on Fund Raising

Nidhi companies are limited to accept deposits from its members only, and hence the funds raised are limited on the number of members only.

Credit Availability

The limited funds that are raised by the members restrict the lending capacity of the Nidhi companies. As the funds are limited the credit given to member is also limited.

Dual vigilance

Even though Nidhi companies are not governed by RBI, i.e. they don't have to complete any of the compliances to be done for RBI; still, the deposit accepting activities are governed by the RBI as well as the central government of India.


Nidhi companies are outside the purview of RBI even if they are NBFC's. The norms have been reviewed, and the government is going to make legislative changes to make Nidhi company regulation stricter. These changes are going to define the lending capacity of the companies. 

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