A Nidhi Company is a special type of Non-Banking Financial Company (NBFC) recognised under Section 406 of the Companies Act, 2013. It is formed for the sole purpose of cultivating the habit of thrift and savings among its members, and to receive deposits and lend money exclusively to its members. Here is the complete guide to Nidhi company registration and compliance.
Key Features of a Nidhi Company
- Can only accept deposits from and lend to its own members — not the general public
- Does not require an RBI license (unlike other NBFCs) — but subject to MCA and limited RBI oversight
- Minimum 7 members at incorporation; must reach 200 members within 1 year
- Must be incorporated as a Public Limited Company with "Nidhi Limited" as the last words of its name
- Minimum Net Owned Funds (NOF) of ₹10 lakh at incorporation; must reach ₹20 lakh within 1 year
Compliance Requirements
Within 1 year of incorporation: Achieve 200 members, ₹20 lakh NOF, and an unencumbered term deposit of ₹10 lakh with a scheduled commercial bank. File Form NDH-1 (Annual return of Nidhi Company) and Form NDH-4 (Application for Nidhi Company status declaration) with MCA.
Ongoing compliance: Ratio of net owned funds to deposits must not exceed 1:20 (i.e., for every ₹1 of NOF, maximum ₹20 in deposits). Unencumbered term deposits must be maintained at 10% of outstanding deposits. Interest on deposits capped at 2% above the highest rate offered by scheduled commercial banks. Cannot accept deposits exceeding 20 times of net owned funds.
Restrictions on Nidhi Companies
- Cannot conduct chit fund, hire-purchase finance, leasing finance or insurance business
- Cannot open branches unless they have declared dividends for 3 consecutive years and NOF exceeds ₹10 lakh
- Cannot accept deposits beyond prescribed limits relative to NOF
- Cannot advertise for deposits to non-members
Conclusion
Nidhi companies provide a structured, regulated framework for local savings and lending communities. Compliance with MCA Nidhi Rules 2014 is essential to avoid penalties and maintain operating status. SPOTON provides complete Nidhi company registration and compliance services across Kerala.
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