nidhi company

The term “Nidhi Company” denotes a business format that is incorporated under the provision of the Companies Act 2013, and aims to achieve the following:

  1. Cultivate the Habit of Thrift
  2. Saving among its Members
  3. Receives Deposits
  4. Lends it Members for Saving

Further, the businesses that are operating as a Nidhi Company will borrow funds from their members and lend the same to their members only.

Also, there are many other names for this business format, such as Nidhi, Benefit Funds, Permanent Fund, Mutual Benefit Company, and Mutual Benefits Funds.

Applicability of Nidhi Company

The Central Government has prescribed specific Rules for Nidhi Company, known as Nidhi Rules 2014. The applicability of these rules can be summarised as:

  1. Every Company that has been declared as a Mutual Benefits or Nidhi under section 620A (1) of the Companies Act 1956.
  2. Every Company that is functioning on the objectives of a Mutual Benefit Society or Nidhi Company, but has not applied to be a Nidhi under section 620A (1) of the Companies Act 1956.
  3. Every company that is incorporated as a Nidhi Company under the provisions of section 406 of the Companies Act 2013.

Pre-Incorporation Requirements

The pre-incorporation requirements for a Nidhi Company are as follows:

  1. Must be incorporated as a Public Limited Company.
  2. Should have a minimum paid up capital of Rs 500000.
  3. Cannot issue Preference Shares.
  4. Must redeem the preference shares if the same has been issued before the commencement of this act.
  5. Should aim to cultivate the habit of Thrift and Savings among its member.
  6. Can receive deposits and lends funds to its members.
  7. Must have the words “Nidhi Limited” as a suffix.

Post-Incorporation Requirements

Every Nidhi Company needs to satisfy the post-incorporation requirements within 1 year as follows:

  1. A minimum of 200 Members.
  2. Should have Rs 1000000 as NOF (Net Owned Funds).
  3. The Ratio of NOF to Deposit must not be more than 1:20.
  4. Should not have Unencumbered Deposits less than 10% of the Total Outstanding deposits as prescribed in Rule 14.

Restrictions on a Nidhi Company

In terms of activities, the restrictions applicable to a Nidhi Company are as follows:

  1. Chit funds
  2. Insurance
  3. Leasing Finance
  4. Advertise themselves to Invite Deposits;
  5. Hire-Purchase Finances
  6. Lotteries
  7. Mortgage or Pledge, Sell the Assets kept as Collateral Security for a Loan
  8. Entering into Partnerships to carry out activities of Lending and Borrowing
  9. Accepting Deposits or Lending Funds to any person other than its own Shareholders
  10. Issuance of Debentures, Preference Shares, or any other type of instrument
  11. Issuance of Equity Shares at aNominal Value of Rs 10/- each
  12. Offering Equity Shares to its Deposit Holders that, too, more 10 shares or shares of the price more than Rs. 100/-.
  13. Opening a Current Bank Account with its Members
  14. Lending to or AcceptingDeposits from Corporates
  15. Paying Fee,Commission, or Incentive for the Mobilisation of Deposits;
  16. Carrying out any business other than Lending or Borrowing from its Members
  17. Hiring a Purchase Financer
  18. PayingBrokerage for Granting Loan to its members.

Rules Concerning Acceptance of Deposits

The rules concerning acceptance of Deposits are as follows:

  1. A Nidhi Company is not allowed to Accept Deposit above 20 times of its NOF.
  2. It can accept FD (Fixed Deposits) for a minimum of 6 months and a maximum of 60 months.
  3. Similarly, it can accept RD (Recurring Deposits) for a minimum of 12 months and a maximum of 60 months.

Rules Regarding Branches of a Nidhi Company

The rules regarding the Branches of a Nidhi Company are as follows:

  1. A Nidhi Company must have earned PAT (Profit after Tax) continuously for a last 3 years.
  2. It is allowed to have a maximum of 3 branches that too, within the same district.
  3. In case it wants to establish more than 3 branches than it needs to obtain permission from RD (Regional Director). However, the branches need to be located within the same district.
  4. A Nidhi Company must inform the ROC about the opening of a Branch within 30 days.

Ceiling Limit on the Loans Offered by a Nidhi Company

The ceiling limit on the loans offered by a Nidhi Company are as follows:

Amount of DepositsPermissible Loan limits
If the amount of deposit is below Rs 2 CroresRs 2 Lacs
If the amount of deposit is between Rs 2 Croresand Rs 20 CroresRs 7.50 Lacs
If the amount of deposit is between Rs 20 Crore and Rs 50 CroresRs 12 Lacs
If the amount of deposit is above Rs 50 CroresRs 15 Lacs


The main motivebehind writing this blog is to make people aware about the business format that aims to cultivate the habit of saving among its members or shareholders. Although it is a company incorporated under the provisions of the Companies Act 2013, but it differs from other companies in terms of its working and operations.

We have tried our best to provide you the in-depth knowledge in a simplified manner.

Hope you all like this post.

You might like this : How to Raise Funding for your New Start-up

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