Nidhi Company

Essential Points for Nidhi Company Registration in India

Essential Points for Nidhi Company Registration in India

In the Hindi language, Nidhi Company means “treasure” and is mainly associated with the habit of thrift and savings among its members. Nidhi Company registration in India is regulated by the MCA (Ministry of Corporate Affairs).

An Overview on Nidhi Company

A Nidhi Company is a company that comes under the section 406 of Companies Act, 2013 and falls under the category of a non-banking financial institution.

Nidhi Company is known under different names such as a mutual benefit company, mutual benefit funds, benefit funds and Nidhi permanent fund. These are mutually benefit owned societies.

A Nidhi Company refers to an entity categorized under the Non-Banking Financial Company (NBFC). It does not involve the Reserve Bank of India (RBI) license and is recognized under Section 406 of the Companies Act, 2013. Based on the basic concept of ‘Principle of Mutuality,’ these companies operate for the common benefit of all their members and shareholders.

The primary objective of a Nidhi company is to ease the processes of borrowing and lending among its members. Nidhi companies are mutual benefiting companies, managed and controlled by the Ministry of Corporate Affairs, which deal exclusively with their shareholders.

Nidhi Company Registration in India

For Nidhi Company Registration in India, incorporation of a Limited Company under the Companies Act, 2013[1] is mandatory. Three Directors are the minimum required besides seven shareholders to initiate the incorporation process. The aim of such a Limited Company is to foster savings, lending, and borrowing amongst its members only for their mutual benefit.

After the successful incorporation of the company, it should have a minimum of 200 shareholders. At no point should the company have unencumbered deposits less than 10 percent of the outstanding deposits. It should always maintain a minimum of Rs. 10 lacs as its Net Owned Fund (NOF). Also, the ratio of NOF to deposits should not be more than 1:20.

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Documents required for Nidhi Company Registration in India

The below mentioned documents are required for registration:

  • Passport size photos;
  • NOC;
  • DSC;
  • DIN of directors;
  • MOA of the company;
  • AOA of the company;
  • Address proof and residential proof;
  • Registered office proof.

Advantages of Nidhi Company Registration

Advantages of Nidhi Company Registration

The advantages of a Nidhi Company are numerous. These are single office institutions having no outside interference. They promote a habit of saving among their shareholders and members and work for the mutual benefit of their depositors and borrowers. These companies do not require any RBI license since the deposits made only by their members are quite small than those handled by other institutions of the financial sector.

They accept term deposits for timely and safe returns from their members only. In the process, they provide easy loans to members.

 The repayment period is limited to one year and seven years, after keeping immovable properties or jewelry as security. The interest rates on loans are less than the normal bank rates.

Restrictions on Nidhi Company

However, there are certain prohibitions in the functioning of such companies. The members are not allowed to continue the business of chit fund, leasing finance, insurance, hire purchase or acquisition of securities issued by any other corporate body. The opening of current accounts with the company members is not allowed as well. Business scope is limited to borrowing and lending among the shareholders, thereby restricting diversification.

Nidhi companies offer lockers on rent to their members subjected to rental income from such facilities. However, the amount should not exceed 20 percent of the gross income of the company at any time during the current fiscal year.

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These companies cannot accept deposits from any other members other than their own. They have the restriction of being unable to lend or deposit money to any other corporate body. A Nidhi company can neither pledge any of the assets deposited as security by its members nor enter into a partnership in its activities of lending and borrowing.


It is to be noted that application for Nidhi Company Registration can be filled online. Once the registration fee is paid online, the registration form can be sent for approval. Once approved, the registration process is complete. In case you have any query related to the same, contact Enterslice.

Read our article: An Overview on Rules Regarding Nidhi Company

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