A Nidhi Company is a unique type of company recognized under Section 406 of the Companies Act 2013, primarily formed for the purpose of cultivating the habit of thrift and savings among its members. It is regulated jointly by MCA and RBI but primarily by MCA through the Nidhi Rules 2014.
Key Characteristics of Nidhi Company
- Can only lend to and accept deposits from its own members
- Cannot do business with general public (no banking/NBFC license needed for member activities)
- Must be a Public Limited Company with "Nidhi Limited" in its name
- Minimum 7 members at incorporation; must reach 200 within 1 year of incorporation
- Primary objective: Mutual benefit of members through savings and lending
- Does not require RBI registration but must comply with RBI prudential norms
Formation Requirements
| Requirement | Specification |
|---|---|
| Minimum members | 7 at incorporation |
| Minimum Net Owned Funds (NOF) | Rs.10 lakh at incorporation; Rs.20 lakh within 3 years |
| Within 1 year | Minimum 200 members; NOF Rs.10 lakh; unencumbered term deposits 10% of outstanding deposits |
| Name requirement | Must end with "Nidhi Limited" |
| Company type | Public Limited Company only |
| Objects | Primarily for mutual benefit — savings and lending among members |
Deposit Limits
Nidhi companies are subject to strict deposit limits under Nidhi Rules 2014:
- Net owned funds of Rs.1: Deposits cannot exceed 20 times of net owned funds
- Minimum deposit tenure: From 6 months to 60 months (recurring deposits)
- Minimum deposit tenure for fixed deposits: 6 months to 60 months
- Maximum interest rate on deposits: Cannot exceed RBI's NBFC ceiling (currently 12.5%)
Lending Rules
- Nidhi can give loans only to members
- Loan against gold/silver: Up to 80% of value of gold/silver
- Loan against property: Up to 50% of property value
- Loan against FD/recurring deposit: Up to 75% of FD amount
- Maximum loan to any single member: Rs.2 lakh for unsecured; secured by NOF limit
- Interest rate on loans cannot exceed the deposit rate by more than 7.5%
Regulatory Compliance
| Form | Purpose | Due Date |
|---|---|---|
| NDH-1 | Half-yearly return: details of deposits, members, loans | Within 30 days of end of first half |
| NDH-2 | Application for extension if 200 members not achieved | Within 30 days from first year-end |
| NDH-3 | Half-yearly return (second half of year) | Within 30 days of end of second half |
| NDH-4 | Application for Nidhi status declaration by MCA | Within 60 days of completion of 1 year |
Restrictions
Nidhi companies are subject to significant restrictions:
- Cannot admit body corporates as members
- Cannot carry on hire purchase, insurance, chit fund, or leasing business
- Cannot issue preference shares or debentures
- Cannot accept deposits outside the state of registered office
- Cannot pay commission or brokerage for mobilizing deposits
- Cannot do any business other than borrowing and lending to members
Nidhi Company vs NBFC
| Aspect | Nidhi Company | NBFC |
|---|---|---|
| Regulator | MCA (primarily) | RBI |
| Operations | Members only | General public |
| Capital requirement | Rs.10 lakh NOF | Rs.10 crore NOF |
| NBFC registration | Not required | Mandatory |
Recent MCA Changes: MCA issued revised Nidhi Rules in 2022 significantly tightening compliance. Key changes: compulsory Nidhi declaration within 120 days of incorporation (via Form NDH-4), stricter limits on loans, enhanced audit requirements, and mandatory half-yearly filings. Non-compliant Nidhi companies face removal from register.