Nidhi Company vs. NBFC

Nidhi Companies are formed with the aim to inculcate the habit of saving money among its members. On the other hand, NBFCs are engaged in the business of loans/advances/ acquisition of securities, etc. This article focuses on elaborating the differences between NFCs and Nidhi Companies.





Nidhi Company is covered under Section 406 of the Companies Act 2013.

NBFC is covered under Section 45-IA of the Reserve Bank of India.


To inculcate the habit of savings among its members.

To provide financial support to weaker sections of the society.

Type of activities

Nidhi Company can perform only those activities which are covered under Nidhi Scheme.

(These companies cannot perform the activities of Chit Fund, Lending Business, Hire Purchase, etc.)

NBFC can carry out financial activities as its primary business activity, which includes activities of Hire Purchase, Chit Fund, Lending Business, etc.

Acquisition of securities

Nidhi Company cannot acquire or buy securities in the form of stocks or shares that has been issued by the company.

NBFC can acquire securities in the form of stocks and shares.

Requirement of RBI approval

Nidhi Company does not require to obtain prior approval from RBI for commencing its business operations.

NBFC mandatorily requires prior approval from RBI before commencing its business operations.

Opening Current Bank Account

Not allowed to open a current bank account in its name.

Are allowed to open a current bank account in its name.

Issuance of Debentures and Preference Share Capital

These companies are not eligible to issue debentures to third parties, nor they can issue preference shares to their members.

NBFC can issue debentures to the third parties and can also issue preference share to its members.

Requirement of branch offices

Nidhi Company is permitted to have branch offices till the time it earns profit continuously for a period of 3 years.

Such a condition is not applicable to NBFC.

Brokerage and Incentives

Nidhi Company is allowed to pay Incentives and brokerage while receiving deposits and granting loans to its members.

Such a condition is not applicable to NBFC.

Registration process

Few compliances are required to be fulfilled.

Require to submit various documents as per direction of RBI.

Operations outside the Registered State

Nidhi Companies cannot carry out their operations in other states.

(Other than its registered office)

Such a condition is not applicable to NBFC.

Eligibility to enter into Partnership

Nidhi Company is not eligible to enter into a partnership with any other business.

Such a condition is not applicable to NBFC.

Requirement of Advertisement

Nidhi Company cannot advertise itself for accepting deposits.

NBFC are allowed to advertise their services to accept or issue loans, deposits, etc.

Net Owned Fund requirement (NOF)

Requires rupees 10 lakhs as NOF.

Requires rupees 2 crores as minimum NOF.


It can be concluded that both Nidhi Company and NBFC have benefits along with the restrictions as per the Act and both the companies are participating in the growth of the economy. Therefore, before deciding the type of company to be formed, all the factors must be considered diligently. 

Related Articles