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NIDHI Company

Nidhi Company

A Nidhi company is a type of Non-Banking Financial Company (NBFC) and is recognized under Section 406 of the Companies Act, 2013. Its primary function is to promote the habit of thrift and savings among its members. It was established to lend and borrow money from its members. Members can borrow and lend money amongst themselves.

Characteristics of a Nidhi Company


Nidhi companies are required to have the word 'Nidhi Limited' at the end of their name. This distinction helps identify the nature of the company to the general public and regulatory authorities.


According to the Companies Act of 2013, a Nidhi company must have a minimum of three directors. These directors are responsible for the governance and smooth operation of the company.

Net Owned Funds:

A Nidhi company should have a net owned fund of Rs. 10 lakh or more.


A Nidhi company should aim to have a minimum of 200 members within its first fiscal year. This fosters a community of savings and borrowing.

Deposit Limit:

Members can only deposit a maximum of 20 times their own funds. This regulation ensures that the company's borrowing and lending remain within controllable limits.

Loan to Members:

Nidhi companies can provide loans to their members, but these loans must be given at reasonable rates, and the terms should be straightforward.

Operational Limitations:

Nidhi companies are prohibited from carrying out microfinance business, leasing finance, hire purchase finance, or chit fund business.

Director Identification Number (DIN):

Directors of the proposed Nidhi company must obtain a Director Identification Number (DIN). This unique identifier ensures transparency and accountability in the operations of the company.

Compliance Documents:

Various legal documents, including the Memorandum of Association (MOA), Articles of Association (AOA), and relevant Nidhi-specific forms, are required. These documents outline the company's structure, objectives, and governing regulations.

Registration Fees:

Payment of the necessary registration fees to the Registrar of Companies (ROC) is mandatory. This fee covers the costs associated with the registration and legal compliance of the company.

Necessary Documentation for Nidhi Company Registration

Business Location Proof:

Documentation showing the legitimacy of the business location, whether through ownership records or a lease/rental agreement.

Consent Document:

A No Objection Certificate, endorsed by the property owner or landlord, is necessary to show consent for using the property as a registered business location.

Personal Identification:

Valid proofs of identity of all members participating in the formation of the company.

Residential Proof:

Valid address documentation of all the members, confirming their residential status.

Member Photographs:

Recent photographs of all the members to ensure proper identification.

PAN Documentation:

Copies of PAN cards belonging to the members for taxation and verification purposes.

Digital Authorization:

Digital Signature Certificate (DSC) to authenticate digital documents.

Director's Unique Identifier:

Every director must have a Director Identification Number (DIN) to ensure transparency and accountability.

Company's Foundational Document:

The Memorandum of Association (MoA) lays out the primary objectives and purposes of the company.

Company's Regulatory Document:

The Articles of Association (AoA) detail the company's internal regulations, responsibilities, and processes.

Limitations Imposed on Nidhi Companies

Financial Restrictions: Nidhi Companies are prohibited from undertaking activities related to chit funds, leasing, hire purchase, insurance, or the procurement of securities from other corporate entities.

Instrument Limitations: These companies cannot release any form of debt instruments or issue preference shares.

Accounting Constraints: They are not permitted to maintain current accounts with their members.

M&A Restrictions: Acquiring another company, either through security purchases or directorial influence, is disallowed without prior approval from the regional director.

Operational Boundaries: Nidhi Companies must refrain from any endeavors that aren't directly linked to their primary activity of borrowing and lending.

External Transactions: Accepting deposits from or lending to individuals outside of its membership is prohibited.

Corporate Restrictions: Engaging in financial transactions with other corporations, either depositing or borrowing, is not allowed.

Partnership Limitations: They cannot form any agreement or partnership for borrowing and lending purposes.

Marketing Restrictions: Sending out deposit solicitation advertisements is not permitted.

Commission Prohibitions: Offering commissions or rewards for deposit acquisition or loan sanctioning is forbidden.

Share Limitations: Imposing a charge for share issuance is not allowed, and a restriction exists on issuing more than 10 shares per depositor.

Loan Constraints: Lending to members exceeding the limits set by the 2014 Nidhi guidelines is disallowed.

Interest Rate Caps: Setting interest rates exceeding a margin of 7.5 per cent is not permissible.

Dividend Limitations: Declaring a dividend that surpasses 25% is not permitted.



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