In India, financial institutions play an essential role in mobilizing savings and channeling investments. They help in the promotion of economic growth and development. Nidhi Company is one such type of financial institution that helps people belonging to lower and middle-income groups by granting loans to them for their different needs, which otherwise become difficult to obtain. In this blog, we will explore the benefits and registration process of Nidhi Company besides its meaning. In addition, we will look at the restrictions and prohibitions imposed on Nidhi Company. 

What is the Meaning of Nidhi Company?

Nidhi, meaning treasure, is a company formed to promote the habit of savings among its members. This Company helps its members in pooling their savings by accepting deposits and paying interest to them. On the other hand, whenever its members are in need, Nidhi Company grants loans to them. Therefore, it accepts deposits and grants loans to its members only, and only an individual can be admitted as its member. 

Further, it is a type of Non-Banking Financial Company (NBFC) and is also known as a mutual benefit society as it operates for the benefit of its members. However, such companies are not required to obtain a license from the RBI. 

Moreover, a Nidhi Company must be registered as a Public Company. Nidhi Companies are governed by Section 406 of the Companies Act, 2013 along with Nidhi Rules, 2014, and amendments therein. Furthermore, the Ministry of Corporate Affairs (MCA) regulates Nidhi Companies in India. 

Definition of ‘Nidhi’ as per Nidhi Rules, 2014

According to Nidhi Rules, 2014, “Nidhi” is a company that is established to promote savings and thrift habits among its members. It exclusively accepts deposits from and provides loans to its members for their mutual benefit, following the regulations set by the central government for this class of companies.”

Benefits of Nidhi Company

The following are the benefits of Nidhi Company. 

No Requirement for RBI License

Unlike other NBFCs, a Nidhi Company is not required to obtain a license from RBI. In addition, Nidhi companies are regulated by MCA and therefore, their registration process is simple with limited documents required. 

Mutual Benefits of Members

A Nidhi Company operates for the benefit of its members. It provides the members an easy way to park their excess funds as deposits with the company. Also, it provides loans to its members whenever they are in need. Further, the process of loan disbursement is fast due to the close connection between the company and its members. 

Limited Capital Requirement

A Nidhi Company can be formed with paid-up share capital of Rs. 10 lakhs. On the other hand, other NBFCs require minimum net-owned funds of Rs. 2 crores for registration. Therefore, limited capital is required to form a Nidhi Company. 

No Limit on Maximum Number of Members

There is no limit on the maximum number of members in a public company. As a Nidhi Company must be incorporated as a public company, it can have as many members as its share capital can accommodate. 

Loans Against Security

A Nidhi Company grants loans against security only like gold, silver, jewelry, fixed deposits, immovable property, National Savings Certificate, insurance policies, etc. Therefore, the company is secured against any default in the repayment of loans. 

Professional Management

Generally, Nidhi companies are managed by finance professionals or other reputed persons who have expertise in the finance field. Therefore, the company is managed in a professional manner which adds to its credibility as well. 

Lower Risk Involved

A Nidhi Company deals with its members only and there is less involvement of external parties that could affect the functioning of Nidhi Company. Therefore, there is a lower risk involved in such companies. 

Simplified Compliance

Relaxation under various provisions of the Companies Act, 2013 like private placement, loans to directors, dividend declaration, etc. are granted to Nidhi Companies. In addition, Nidhi Rules, 2014 are less stringent and therefore, it brings ease in compliance for Nidhi Companies. 

Requirements for Forming a Nidhi Company

The following are the requirements for forming a Nidhi Company after the commencement of Nidhi (Amendment) Rules, 2022. 

Paid-Up Equity Share Capital

A Nidhi Company shall have a minimum paid-up equity share capital of Rs. 10 lakhs. In addition, a Nidhi Company cannot issue preference shares. 


A minimum of seven members are required to incorporate a Nidhi Company. However, within 120 days of incorporation,  it shall have at least 200 members. 

Moreover, a body corporate, trust, and minor cannot become members of a Nidhi Company. 


A minimum of three directors are required to form a Nidhi Company. In addition, all the directors must be members of the company. 


A Nidhi Company shall add a suffix ‘Nidhi Limited’ in its name. 

Object Clause

A Nidhi Company shall have an object clause in its Memorandum of Association (MOA) that it is formed with the objective of “cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.” 

Documents Required for Nidhi Company Registration

The following documents are required for the registration of Nidhi company. 

Documents of the Company

  • Memorandum of Association (MOA) and Articles of Association (AOA) 
  • Proof of Registered Office (If the premises are owned by the company then a copy of the sale deed or utility bills not older than 2 months and if it is taken on rent by the company, a copy of the rent agreement or NOC i.e., No Objection Certificate from the owner of the premises) 

Documents of Directors and Shareholders

  • Proof of Identification (Copy of Aadhaar Card / PAN Card/ Passport/ Driving license) 
  • Proof of Address (Copy of Utility Bills like Electricity Bill, Telephone Bill, etc. not older than 2 months or the Latest Bank Statement) 
  • Passport size photographs 

Nidhi Company Registration Process

The following are the steps that are required to be followed for Nidhi Company registration – 

Step 1: Application for Name Approval

It is the first step in the registration of a company. Part-A of the SPICE+ form (form for company registration) is filed for name reservation on the MCA portal in which you have to provide two different names of the proposed company. MCA will approve one out of the two names. 

Step 2: Application for DSC of Directors and Shareholders

The next step is to apply for obtaining a Digital Signature Certificate (DSC) of directors and shareholders for digital signing of forms. DSC can be obtained from certifying authorities of the government for which identity proof of the person is required. However, if the directors/shareholders already have DSC, then this step can be skipped. 

Step 3: Collection and Preparation of Documents

After approval of the name and obtaining the DSC of directors and shareholders, all the above-mentioned documents of the company, directors, and shareholders shall be collected. 

In addition, the MOA and AOA of the company shall be prepared. However, if the number of shareholders is less than or equal to 7, e-MOA and e-AOA can be attached. 

Step 4: Application for Registration

Once all the documents are collected and prepared, an application for incorporation of the company shall be filed in Part B of the SPICE+ form. Also, the Director Identification Number (DIN) of directors can be obtained through the SPICE+ form. 

Further, all the documents and other linked forms shall be attached with the SPICE+ form, and payment of fees shall be made (fees depend on the authorized capital of the company). 

Step 5: Issue of Certificate of Incorporation

If the registration form is complete in all aspects along with the required documents, the Certificate of Incorporation containing the Corporate Identification Number (CIN), PAN, TAN, and GSTIN (if applied for) of the company will be issued. 

Note: Registration of a company in India requires certification from a Chartered Accountant, Company Secretary, or Cost Accountant. 

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Application for Declaration as Nidhi Company

Once the company is incorporated, it should make an application to the Central Government in Form NDH-4 (along with fees) to be declared as a Nidhi Company. The application shall be made within 120 days of incorporation of the company. 

Further, a company should fulfill the following two conditions for making an application to be declared as a Nidhi Company – 

  1. It should have at least 200 members. 
  2. The Net Owned Funds of the company shall be Rs. 20 lakhs or more. 

Restriction and Prohibition on Nidhi Company

Rule 6 of the Nidhi Rules, 2014 imposes several restrictions or prohibitions on a Nidhi Company. 

Accordingly, a Nidhi Company shall not carry out/ indulge in the following activities – 

(a) Conduct the business of chit fund, hire purchase finance, leasing finance, insurance, or acquire securities issued by any body corporate.

(b) Offer preference shares, debentures, or any other debt instrument under any name or form.

(c)  Open any current account with its members.

(d) Acquire or purchase securities of any other company or control the composition of the Board of Directors of any other company in any manner, or enter into arrangements for the change of its management.

(e) Engage in any business other than borrowing or lending in its own name.

However, Nidhis complying with all provisions of these rules may provide locker facilities for rent to its members, provided that the rental income from such facilities does not exceed twenty percent of Nidhi’s gross income at any point during a financial year.

(f) Accept deposits from or lend to anyone other than its members.

(g) Pledge any assets provided by its members as security.

(h) Accept deposits from or lend money to any body corporate.

(i) Enter into any partnership arrangement in its borrowing or lending activities.

(j) Issue or cause to be issued any form of advertisement soliciting deposits.

However, private circulation of fixed deposit scheme details among Nidhi’s members with the words “for private circulation to members only” shall not be considered an advertisement for soliciting deposits.

(k) Pay any brokerage or incentive for mobilizing deposits from members or deploying funds or granting loans.

(l) Take loans from banks or other financial institutions to grant loans to Nidhi members. 


Overall, Nidhi Companies stand as a unique and significant player in the financial landscape. It not only offers several benefits to its members but is also easier to form as compared to other NBFCs. However, one shall keep in mind the restrictions and prohibitions imposed on a Nidhi Company before incorporating the same. 

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