Nidhi Company Registration in India

Nidhi Company Registration in India

Nidhi companies have become an increasingly popular financial services organization in India. Nidhi Company also known as Permanent Funds or Mutual Benefit Companies, Nidhis play a crucial role in promoting thrift and savings culture in local communities.

This comprehensive guide is from which provides everything you need to know about Nidhi companies – their meaning, history, rules and regulations, benefits, and process for starting one. is a Pvt Ltd Co. which provides all kinds of legal business services from Company Registration such as Nidhi Company , Pvt ltd, Public Ltd, etc to all kinds of Taxation Solutions.

Table of Contents

  • What is a Nidhi Company?
  • History and Background
  • Governing Laws and Regulations
  • Key Features
  • Requirements for Starting a Nidhi Company
  • Registration Process
  • Restrictions and Compliances
  • Benefits of a Nidhi Company
  • Challenges Faced by Nidhi Companies
  • Difference Between Nidhi, NBFC and Banks
  • Conclusion

What is a Nidhi Company?

A Nidhi company refers to a non-banking finance company (NBFC) that is recognized under Section 406 of the Companies Act 2013. The core business activity of a Nidhi company is borrowing and lending money between its members.

Some key characteristics of Nidhi companies are:

  • Their dealings are restricted to members only.
  • Membership is limited to individuals, not corporate entities.
  • They promote thrift and savings culture in local communities.
  • They provide loans to members at reasonable rates for needs like home construction, marriage expenses etc.
  • The source of funds is monthly contributions from members.

Nidhi means “treasure” in Indian languages. However, in the financial sector context, Nidhi refers to mutual benefit companies notified by Government of India.

History and Background of Nidhi Company

Nidhi companies have a long history in India. They first emerged to provide easy access to credit in rural and semi-urban areas where banks did not have significant presence.

The basic concept of Nidhis is based on “principle of mutuality”. The companies operate by pooling savings from members and lend funds back to approved members as per their requirements.

Nidhi firms are highly localized single office entities. They are mutual benefit societies since all dealings happen only with members. These companies are also known as Permanent Funds, Benefit Funds etc.

Nidhis are most popular in Southern states, especially Tamil Nadu which accounts for over 80% of total Nidhi companies in India. They play a key role in meeting the credit needs of low and middle income households.

Governing Laws and Regulations for Nidhi Company

Nidhi companies are regulated under Ministry of Corporate Affairs, Government of India. The applicable rules include:

  • Companies Act 2013 – Recognizes Nidhi companies under Section 406.
  • Nidhi Rules 2014 – Lays down rules and processes specifically for Nidhis.
  • Various circulars and notifications issued by MCA.

Although Nidhis are a type of NBFC, RBI has exempted them from core NBFC regulations like registration, capital adequacy and other oversight from RBI.

Key Features

Some of the key features of Nidhi companies are:


  • Promote habit of thrift, savings and mutual help amongst members
  • Receive deposits and lend only to members


  • Only individuals can be members
  • Minimum 200 members required
  • Minor can be admitted as depositor but not member

Capital Requirements

  • Minimum paid up capital of Rs 5 lakhs
  • Minimum net owned funds Rs 10 lakhs

Borrowing Powers

  • Can only receive deposits from and lend to members
  • Maximum limit of 20 times its net owned funds


  • Loans only provided to members
  • Maximum limit of Rs 15 lakhs based on owned funds
  • Secured via gold, property mortgage or government securities


  • Do not require RBI approval for registration
  • Exempted from core NBFC regulations by RBI
  • Regulated by MCA under Companies Act and Nidhi Rules

Requirements for Starting a Nidhi Company

Following are key requirements for starting a Nidhi company:

  • Must register as a public limited company with MCA
  • Add words “Nidhi Limited” at the end of company name
  • Minimum 7 members required to start
  • Minimum paid up capital of Rs 5 lakh
  • No issuance of preference shares allowed
  • Object should be cultivating habit of savings/thrift and lending activities
  • Directors must be members holding shares in their names
  • Company must have own office premises; no shared spaces

Registration Process for Nidhi Company

Here are the steps involved in registering a new Nidhi company:

Name approval – Apply for name availability and get approval for proposed name from MCA.

SPICE+ – File company incorporation application via SPICe+ along with documents like MOA, AOA etc.

Incorporation – On approval, MCA will issue Certificate of Incorporation. The company gets registered as private/public limited entity.

Commencement – Apply for Company Commencement to start operations within 180 days of incorporation.

NDH-4 – File form NDH-4 with MCA to get Nidhi company notification under Section 406 of Companies Act 2013.

NDH-1 – File form NDH-1 within 90 days of financial year end to report compliance with Nidhi rules.

The process takes around 4-6 weeks if all requirements are met properly. The cost of registering a Nidhi company would be around Rs. 15,000-20,000.

Restrictions and Compliances

Nidhi companies have to operate as per restrictions specified under Nidhi Rules:

  • Cannot issue preference shares or debentures
  • Cannot engage in non-core activities like leasing, insurance, chit funds etc.
  • Cannot accept deposits from non-members
  • Total deposits cannot exceed 20 times net owned funds
  • Interest rate on loans capped at maximum limit
  • Cannot acquire controlling stake in any company
  • Detailed record keeping and filing of returns with RoC is required

Benefits of a Nidhi Company

Some key benefits of a Nidhi company include:

  • Simpler registration – Compared to NBFCs and banks, Nidhi registration is much simpler and faster. No RBI approval required.
  • Local operations – Nidhis can be started with single branch operations to serve local community.
  • Limited regulations – Being exempt from major NBFC regulations helps reduce compliance burden.
  • Mutual benefits – As all members contribute savings, they also benefit from access to credit at reasonable rates.
  • Promotes savings culture – Helps inculcate important habit of thrift and savings.
  • Financial inclusion – Serves the unbanked by providing easy access to credit.
  • Employment generation – Provides jobs for local youth in the company operations.

Challenges Faced by Nidhi Companies

Despite their benefits, Nidhi companies face some key challenges:

  • Raising funds only from members restricts growth
  • Lending also limited due to reliance on members’ deposits
  • Low public awareness about Nidhis compared to banks
  • Limited use of technology for operations
  • Struggle with financial inclusion of low income households
  • Reaching out to rural populations still an issue
  • Questions about corporate governance and transparency practices

Many Nidhis are now modernizing systems and expanding services using digital models to overcome these limitations.

Difference Between Nidhi, NBFC and Banks

Here is a quick comparison between Nidhi companies vs NBFCs vs Banks:

ParameterNidhi CompanyNBFCBank
RegistrationVery simple under MCANeeds RBI licenseExtensive RBI compliance
OwnershipMostly closely heldCan be widely heldMostly widely held
RegulationsLight touch by MCAStrict oversight by RBIHighly regulated by RBI
Capital NeedsLow at Rs 5 lakhsHigher at Rs 2 croresVery high at Rs 500 crores
ServicesLimited to membersNo restrictionsServing public at large
GeographyLocal operationsCan have branches across IndiaWidespread networks
Deposit sourceOnly membersCan accept public depositsFrom wider public
Comparison of Nidhi, NBFC and Banks

While NBFCs and Banks provide wider suite of services, Nidhis fill an important niche for community-based lending.


Nidhi companies hold special significance for India’s microfinance sector due to their local presence and mutual structure. However, improving corporate governance, transparency, use of technology and expanding member base are crucial for their long-term growth.

By providing easy access to formal credit, promoting financial inclusion and generating employment, Nidhi companies can continue supporting development of rural economies and poorer sections of society.

For individuals looking to promote savings culture and provide affordable credit access to their local communities, starting a Nidhi company offers a viable option. With their lighter regulatory approach, Nidhis are both easier to form and manage compared to NBFCs or banks.

Use this article from as a helpful guide or you can directly contact to better understand nidhi company related queries and issues.

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