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Nidhi Company

Nidhi Company is a business structure incorporated under Section 20A of the Companies Act, 1956 and is governed by the Ministry of Corporate Affairs (MCA), and there are certain Nidhi company rules to be followed in India. Nidhi Company is mainly formed for developing the habit of savings among its members only for their mutual benefit. The major source of funding for the Nidhi Company is the contribution from the members.Nidhi Companies are registered Limited Companies involved in taking deposits and lending to its members. The activities of a Nidhi Company does fall under the purview of Reserve Bank of India, as it is similar to a NBFC. However, as Nidhi Companies ONLY deal with its shareholder-members money, RBI has exempted Nidhi Companies from the core provisions of the RBI and other regulations applicable to a NBFC.

To start a Nidhi Company in India, the first step is to incorporate a limited company  under the Companies act 2013. Post incorporation of the Limited Company, within a period of one year from the commencement, the Nidhi Company must meet all of the following criteria:

  • Not have less than two hundred members (shareholders);
  • Have Net Owned Funds (NOF) of ten lakh rupees or more;
  • Have unencumbered term deposits of not less than ten per cent of the outstanding deposits; and
  • Have a ratio of Net Owned Funds to deposits of not more than 1:20.

“Net Owned Funds” means the aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet.

In the case at the end one year from commencement the Nidhi Company is not able to meet the above requirement, the Company may within thirty days from the close of the first financial year, apply to the Regional Director in Form NDH-2 for extension of time.

If even after the second financial year the Nidhi Company is not able to meet the requirements for a Nidhi Company, then the Nidhi Company shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions for operating as a Nidhi Company and be liable for penal consequences.

  • Promotes the habit of saving amongst low and middle- income groups.
  • They accept term deposits for duly returns
  • Easy and flexible loans as compared to traditional banks
  • Secured investments
  • Minimum documentation and formalities for taking a loan

Nidhi Company provides loan and deposit to its members only. Nidhi Company plays a crucial role in the financial growth of middle and lower-middle-income group by providing them with financial services with minimum formalities. For low-income people, Nidhi Company is an attractive source of investment. No external body is allowed in the decision-making process of a Nidhi Company. It is not governed by any committees or trusts. It is maintained and controlled by its members only. In fact, a Nidhi Company does not need the approval of Reserve Bank of India before sanctioning loan to its members.

  1. Capital requirement –

    If you are willing to apply for Nidhi company, minimum Paid Up Share Capital of Rs. Five lakh is required. The last name of Company must end with Nidhi Limited.

  2. Minimum 3 Directors –

    The age of Directors must be18+ years and family members are also eligible to join as a Director.

  3. Shareholders – 

    Minimum 7 shareholders are required. Directors can also own shares in Nidhi Company.

  4. No Minimum Shareholdings – 

     If you are willing to keep maximum control over the business you can even retain 99.99% shares

  5. No Finance Experience Required – 

    If you are not having any experience with NBFC or Bank or Nidhi, do not worry, you are still eligible for Nidhi Company License.

  1. Proof of the registered place of business (Ownership documents/ rent or lease agreement)
  2. No Objection Certificate (signed by the owner/ landlord)
  3. Identity proofs
  4. Address proofs of the members
  5. Photos of the members
  6. PAN card copies of the members
  7. Digital Signature (DSC)
  8. Director Identification Number (DIN) of the directors
  9. Memorandum of Association of the company (MoA)
  10. Articles of Association of the company (AoA)
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