A Nidhi Company is a type of non-banking financial company (NBFC) in India that is formed to lend and borrow money among its members. It is created for the mutual benefit of its members and operates mainly in the small savings and lending sector, often in rural and semi-urban areas.
Mutual Benefit Society:
It is established for the mutual benefit of its members.
Only members (shareholders) can deposit or borrow money.
Regulated by MCA, Not RBI:
Governed by Section 406 of the Companies Act, 2013 and Nidhi Rules, 2014.
Not required to get a license from the Reserve Bank of India (RBI), though RBI has the power to issue directions.
Incorporation Requirements:
Must be a Public Company.
Requires minimum 7 members and 3 directors.
Must have the words "Nidhi Limited" in its name.
Capital Requirements:
Minimum paid-up equity share capital: ₹10 lakhs.
No preference shares allowed.
Restrictions:
Cannot carry out business of chit fund, leasing finance, insurance, or hire purchase.
Cannot issue advertisements to solicit deposits.
Cannot accept deposits or lend to non-members.
Compliance Requirements:
File annual returns and financial statements with the Registrar of Companies (RoC).
Must comply with Nidhi Rules, including limits on lending and deposits.
Within 1 year, a Nidhi Company must:
Have at least 200 members.
Maintain Net Owned Funds (NOF) of ₹10 lakhs or more.
Maintain a ratio of NOF to deposits not exceeding 1:20.
Simple formation and operation.
Low-risk model.
Encourages savings among members.
Lower interest rates on loans compared to informal moneylenders.
Limited scope (members only).
Strict regulatory compliance.
Cannot do external business like a regular NBFC.
