Nidhi Company Registration in India: Capital, Members & Compliance Guide (2026)
Quick Answer
A Nidhi Company is a type of Non-Banking Financial Company (NBFC) registered under Section 406 of the Companies Act, 2013, established for the purpose of cultivating the habit of thrift and savings amongst its members and receiving deposits from and lending to its members only. It must be incorporated as a public limited company with a minimum of 7 members (3 directors), minimum equity share capital of Rs 5 lakh (at incorporation), and must achieve 200 members and net owned funds (NOF) of Rs 20 lakh within 120 days of incorporation. Nidhi companies are exempt from RBI regulation under Section 45-IA of the RBI Act. Governed by the Nidhi Rules, 2014 (as amended by Nidhi (Amendment) Rules, 2022). At Virtual Auditor, we handle Nidhi Company registration for Rs 14,999 all-inclusive.
Definition — Nidhi Company: Under Section 406(1) of the Companies Act, 2013, “Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit. A Nidhi Company is essentially a mutual benefit society operating in the corporate form — it accepts deposits only from its members (not from the public) and provides loans only to its members. It is classified as an NBFC but is specifically exempted from the core provisions of RBI regulation, including the requirement to obtain a Certificate of Registration from the RBI.
Legal Framework: Section 406 and Nidhi Rules, 2014
Section 406 — Companies Act, 2013
Section 406 empowers the Central Government to declare a company as a Nidhi Company and to direct that the provisions of the Act shall apply to such company or shall apply with such exceptions, modifications, and adaptations as may be specified. The Central Government has notified the Nidhi Rules, 2014 under this Section, which prescribe the detailed requirements for incorporation, membership, deposits, loans, and compliance.
Nidhi Rules, 2014 (as Amended)
The Nidhi Rules, 2014 were issued vide MCA Notification G.S.R. 258(E) dated 31 March 2014 and have been amended multiple times — most significantly by the Nidhi (Amendment) Rules, 2022 which tightened the requirements for Nidhi incorporation and operations. Key rules include:
- Rule 3 — Incorporation requirements: Minimum 7 members, minimum 3 directors, “Nidhi Limited” suffix, object clause restricted to mutual benefit
- Rule 4 — Membership minimum: 200 members within 120 days of incorporation
- Rule 5 — Net Owned Funds: Rs 20 lakh within 120 days of incorporation
- Rule 6 — Unencumbered term deposits: Not less than 10% of outstanding deposits
- Rule 7 — Net Owned Funds to deposits ratio: 1:20 (a Nidhi cannot accept deposits exceeding 20 times its NOF)
- Rule 14 — Deposit limits: Maximum deposit from a single member — fixed and recurring deposits up to the limits prescribed
- Rule 15 — Ceiling on loans: Maximum loan to a single member subject to prescribed limits
- Rule 21 — Interest rate ceiling: Maximum interest on deposits and minimum/maximum interest on loans
Incorporation Requirements
Pre-Conditions (Rule 3 — Nidhi Rules, 2014)
| Requirement | Detail |
|---|---|
| Company type | Public Limited Company (not private) |
| Minimum members at incorporation | 7 (as required for public company under Section 3(1)(a)) |
| Minimum directors | 3 (minimum for public company under Section 149(1)(a)) |
| Minimum equity share capital | Rs 5 lakh (at incorporation) |
| Name | Must end with “Nidhi Limited” |
| Object clause | Restricted to cultivating thrift, savings, and mutual benefit among members |
| Objects NOT permitted | Chit fund, hire purchase, leasing, insurance, acquisition of securities issued by any body corporate |
Post-Incorporation Requirements (Within 120 Days)
Under the Nidhi (Amendment) Rules, 2022, a Nidhi company must meet the following requirements within 120 days of incorporation:
- Minimum 200 members: The company must have at least 200 members. Members are individuals who hold equity shares in the Nidhi. Only individuals can be members — no body corporate, trust, or HUF can hold shares in a Nidhi.
- Net Owned Funds (NOF) of Rs 20 lakh: NOF = paid-up equity share capital + free reserves minus accumulated losses minus intangible assets. The Rs 20 lakh NOF requirement means the company must have substantive capital, not just the Rs 5 lakh minimum at incorporation.
- NOF to deposits ratio of 1:20: The total deposits accepted cannot exceed 20 times the NOF.
- Unencumbered term deposits: Not less than 10% of outstanding deposits must be maintained as unencumbered term deposits with a scheduled commercial bank (other than a co-operative bank or a regional rural bank).
Filing Form NDH-4: Within 120 days of incorporation, the Nidhi must file Form NDH-4 with the Regional Director, declaring that it has met the membership, NOF, and deposit ratio requirements. If the Nidhi fails to achieve 200 members or Rs 20 lakh NOF within 120 days, the Central Government may direct the company to not accept deposits until compliance is achieved.
Practitioner Insight — CA V. Viswanathan, IBBI/RV/03/2019/12333
The 120-day timeline to achieve 200 members and Rs 20 lakh NOF is the most challenging aspect of Nidhi Company formation. At Virtual Auditor, we advise promoters to have a clear plan for member acquisition BEFORE incorporation — not after. The 200 members need not invest large amounts; each member can subscribe to even Rs 100 worth of equity shares. The critical factor is having a community base — self-help groups, professional associations, cooperative housing societies, or employee groups — from which 200 members can be onboarded quickly. We have seen Nidhi companies that incorporated without this groundwork and then struggled to meet the 120-day deadline, resulting in regulatory action. Plan the member base first, then incorporate.
Registration Process
Step 1: DSC and DIN
Obtain Digital Signature Certificates for all 3 proposed directors. DIN is allotted through the SPICe+ form (up to 3 directors).
Step 2: Name Reservation via RUN
Reserve the company name through RUN on the MCA portal. The name MUST end with “Nidhi Limited” (not “Private Limited” since a Nidhi is a public company). Government fee: Rs 1,000.
Step 3: File SPICe+ Part B
File SPICe+ (INC-32) Part B as a public limited company with the Nidhi-specific object clause. Upload MOA (with restricted objects — thrift, savings, and lending to members only) and AOA. The AGILE-PRO form is filed for PAN, TAN, and bank account.
Critical MOA clause: The objects clause must specifically state that the company is formed for cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit. The objects must NOT include chit fund business, hire purchase finance, leasing finance, insurance business, or acquisition of securities issued by any body corporate.
Step 4: Certificate of Incorporation
Upon successful processing, the ROC issues the Certificate of Incorporation. The company is incorporated as “XYZ Nidhi Limited” with PAN and TAN.
Step 5: Onboard 200 Members and Achieve Rs 20 Lakh NOF
Within 120 days of incorporation, the Nidhi must achieve the minimum 200 members and Rs 20 lakh NOF. This is done by issuing equity shares to new members through private placement or rights issue.
Step 6: File Form NDH-4
File Form NDH-4 with the Regional Director within 120 days, declaring compliance with membership and NOF requirements. Government fee: Rs 500.
Step 7: File Form NDH-1 (Half-Yearly Return)
Nidhi companies must file Form NDH-1 (half-yearly return) with the ROC within 30 days from the close of each half-year (by 31 October for April-September, and by 30 April for October-March).
Deposit and Lending Rules
Deposits (Rule 9-14)
- Accepted from members only: A Nidhi cannot accept deposits from non-members or from the public
- Types of deposits: Fixed deposits, recurring deposits, savings deposits, current deposits (subject to conditions)
- Fixed deposit tenure: Minimum 6 months, maximum 60 months
- Recurring deposit tenure: Minimum 12 months, maximum 60 months
- Maximum deposit per member: Fixed deposits not exceeding Rs 15 lakh per individual member (under Nidhi Rules as amended)
- Interest rate on deposits: Maximum rate as notified from time to time — currently, the ceiling is the maximum rate of interest prescribed by RBI for NBFCs plus 2 percentage points
- Total deposits ceiling: Cannot exceed 20 times the NOF (1:20 ratio)
Loans (Rule 15-20)
- Only to members: A Nidhi cannot lend to non-members, nor can it lend to bodies corporate
- Maximum loan per member: Rs 15 lakh per individual member (under Nidhi Rules as amended)
- Purpose of loans: Typically for personal, household, or business purposes of the member
- Security for loans: Loans must be secured by — (a) gold, gold ornaments, or both; (b) immovable property (up to 50% of the value of property); (c) fixed deposits held with the Nidhi; (d) pledge of securities of Government or other notified securities
- Unsecured loans: Up to Rs 2 lakh per member (for a Nidhi with NOF of Rs 2 crore or more)
- Loan against immovable property: Only for properties situated within the district and adjoining districts where the Nidhi’s registered office is situated
- Interest rate on loans: Maximum 7.5% above the highest rate offered on deposits
Compliance Requirements
Annual Filings
| Filing | Form | Due Date |
|---|---|---|
| Half-yearly return | NDH-1 | Within 30 days of close of each half-year |
| Annual return | NDH-3 (with MGT-7) | Within 60 days of AGM |
| Financial statements | AOC-4 | Within 30 days of AGM |
| Income tax return | ITR-6 | 31 October (if audit applicable) |
| Statutory audit | Audit report | Before filing AOC-4 |
| AGM | — | Within 6 months from FY end |
| Board meetings | — | Minimum 4 per year |
Ongoing Compliance Ratios
- NOF to deposits ratio: 1:20 — maintained at all times
- Unencumbered term deposits: 10% of outstanding deposits — maintained at all times
- Members: Minimum 200 — maintained at all times (if membership falls below 200, the Nidhi must restore it within 3 months)
Restrictions and Prohibitions
Under the Nidhi Rules, 2014, a Nidhi company CANNOT:
- Open branches or collection centres without prior approval of the Regional Director (and only if it has been profitable for the last 3 financial years and complies with all Nidhi Rules)
- Carry on chit fund, hire purchase finance, leasing finance, or insurance business
- Acquire securities issued by any body corporate
- Issue preference shares, debentures, or any other debt instrument
- Open current accounts with its members
- Accept deposits from or lend to bodies corporate
- Pledge any of the assets lodged by its members as security
- Enter into partnership arrangements in its borrowing or lending activities
- Accept deposits from or lend to anyone other than its members
- Pay brokerage or commission for mobilising deposits
Nidhi Company vs Other Financial Entities
| Parameter | Nidhi Company | NBFC | Co-operative Society |
|---|---|---|---|
| Regulator | MCA (exempt from RBI) | RBI | State Cooperative Registrar |
| Customers | Members only | Public | Members only |
| RBI registration | Exempt | Mandatory (Certificate of Registration) | Not applicable |
| Minimum capital | Rs 5 lakh (incorporation) / Rs 20 lakh NOF (120 days) | Rs 2 crore (deposit-taking) / Rs 10 crore (non-deposit) | Varies by state |
| Geographical scope | Pan-India (single registration) | Pan-India | State-specific |
Summary — Nidhi Company Registration
- Governing law: Companies Act, 2013 — Section 406; Nidhi Rules, 2014 (as amended 2022)
- Company type: Public limited company with “Nidhi Limited” suffix
- Minimum at incorporation: 7 members, 3 directors, Rs 5 lakh equity share capital
- Within 120 days: 200 members, Rs 20 lakh NOF, 1:20 NOF-to-deposits ratio, 10% unencumbered term deposits
- Deposits and loans: Only to/from members; maximum Rs 15 lakh per member
- RBI exemption: Exempt from Section 45-IA of RBI Act (no RBI registration required)
- Prohibited activities: Chit fund, hire purchase, leasing, insurance, securities acquisition
- Annual filings: NDH-1 (half-yearly), NDH-3, AOC-4, MGT-7, statutory audit, ITR-6
- Virtual Auditor fee: Rs 14,999 all-inclusive
Frequently Asked Questions
1. Is RBI registration required for a Nidhi Company?
No. Nidhi companies are specifically exempted from the requirement to obtain a Certificate of Registration from the RBI under Section 45-IA of the Reserve Bank of India Act, 1934. They are regulated by the Ministry of Corporate Affairs (MCA) under the Companies Act and Nidhi Rules. This is one of the primary reasons promoters choose the Nidhi structure — it allows deposit acceptance and lending without RBI licensing, provided all activities are restricted to members only.
2. Can a Nidhi Company accept deposits from non-members?
No. This is the fundamental restriction that defines a Nidhi Company. Under Rule 9 of the Nidhi Rules, 2014, a Nidhi can accept deposits only from its members. Accepting deposits from non-members is a violation of the Nidhi Rules and can attract penalties under the Companies Act. If you want to accept deposits from the public, you need an NBFC licence from the RBI.
3. What happens if the Nidhi fails to achieve 200 members within 120 days?
If the Nidhi fails to achieve 200 members or Rs 20 lakh NOF within 120 days and does not file Form NDH-4, the Central Government (through the Regional Director) may direct the company to not accept any further deposits until compliance is achieved. Continued non-compliance can result in further regulatory action, including directions to wind up the Nidhi.
4. Can a Nidhi Company open branches?
Yes, but with prior approval. Under Rule 4A of the Nidhi Rules, a Nidhi can open branches only if: (a) it has been in operation for at least 3 financial years, (b) it has earned net profits during each of the 3 preceding financial years, (c) it complies with all Nidhi Rules, and (d) it obtains prior approval from the Regional Director by filing Form NDH-2. The branch must be within the same state or in adjoining districts.
5. Can a private limited company be converted to a Nidhi Company?
No. A Nidhi Company must be incorporated as a public limited company from the start. A private limited company cannot be directly converted to a Nidhi. However, a private company can first convert to a public company under Section 14 of the Companies Act, and then alter its objects and comply with Nidhi requirements — though this is a lengthy process. It is always advisable to incorporate directly as a Nidhi Limited.
6. What is the tax rate for a Nidhi Company?
A Nidhi Company is taxed as a domestic company under the Income Tax Act. The tax rate is 22% under Section 115BAA (plus surcharge and cess, effective ~25.17%) if the company does not claim specified deductions, or 30% under the regular provisions. Interest paid to members on deposits is deductible as a business expense. Interest earned on loans to members is taxable as business income.
7. How is a Nidhi Company different from a chit fund company?
A Nidhi Company accepts deposits from members and lends to members — it is a mutual benefit savings and lending institution. A chit fund company runs a chit scheme where members contribute a fixed amount periodically, and the pooled amount is auctioned among members. The Nidhi Rules specifically prohibit a Nidhi from carrying on chit fund business. Chit funds are regulated separately under the Chit Funds Act, 1982, and require registration with the respective State Government.
Virtual Auditor — AI-Powered CA & IBBI Registered Valuer Firm
Valuer: V. VISWANATHAN, FCA, ACS, CFE, IBBI/RV/03/2019/12333
Chennai (HQ): G-131, Phase III, Spencer Plaza, Anna Salai, Chennai 600002
Bangalore: 7th Floor, Mahalakshmi Chambers, 29, MG Road, Bangalore 560001
Mumbai: Workafella, Goregaon West, Mumbai 400062
Phone: +91 99622 60333 | Email: support@virtualauditor.in
Book a Free Consultation
