Nidhi company registration has two stages: incorporate a public company with at least ₹10 lakh of paid-up equity capital, then, within 120 days, reach 200 members and ₹20 lakh of net owned funds and apply in Form NDH-4 to be declared a Nidhi. Under the Nidhi Rules 2014, the company cannot take deposits or lend until the Central Government approves NDH-4, which it must decide within 45 days.
What is a Nidhi company, and who should form one?
A Nidhi is a public company that the Central Government declares a Nidhi under section 406 of the Companies Act 2013; under the Nidhi Rules it exists to cultivate thrift and savings among its members, taking deposits from and lending to members only, for their mutual benefit. It suits a community savings and loan group that is happy to stay small and local.
Before you commit, check four limits that rule out many business plans:
- No outsiders. Deposits and loans are for members only, and a body corporate, trust or minor cannot be admitted as a member (rules 6(f) and 8).
- One state. A Nidhi cannot open a branch outside the state of its registered office (rule 10(4)).
- No foreign capital. Foreign direct investment in Nidhi companies is prohibited under India's FDI policy.
- No bank funding. Since 19 April 2022 a Nidhi cannot borrow from banks or financial institutions to lend to members (rule 6(l)).
The trade-off is lighter regulation. RBI exempts Nidhi companies from registering as NBFCs, and a new NBFC needs ₹10 crore of net owned funds.
Nidhi Rules 2014 requirements at a glance
The numbers below are the current requirements after the amendments of 2022 and 2024. Several older figures still circulate, such as ₹5 lakh capital and ₹10 lakh net owned funds, so check any checklist against this table.
| Requirement | Current rule | Source |
|---|---|---|
| Type of company | Public company, limited by shares | Rule 4(1) |
| Paid-up equity capital | At least ₹10 lakh | Rule 4(1), amended 2022 |
| Members at incorporation | At least 7 | Section 3(1)(a) |
| Members for NDH-4 | At least 200 within 120 days | Rule 3B(1) |
| Net owned funds | At least ₹20 lakh | Rules 3B(1) and 9 |
| Directors | At least 3, each a member, for up to 10 consecutive years | Section 149(1); rule 17 |
| Shares | Fully paid equity of at least ₹10 each; no preference shares | Rules 4(2) and 7 |
| Deposit ceiling | 20 times net owned funds | Rule 11 |
| Liquid reserve | At least 10% of deposits in unencumbered term deposits with a scheduled commercial bank or post office | Rule 14 |
| Dividend | Not more than 25% in a financial year | Rule 18, substituted 2022 |
How to register a Nidhi company, step by step
The process runs through SPICe+ on the MCA portal and then Form NDH-4, which was replaced with a new version from 23 January 2023.
- Get digital signatures for the subscribers and directors, and a DIN for each director who does not have one.
- Incorporate a public company through SPICe+ with objects limited to thrift, savings, member deposits and member loans (rule 4(4)). Part B carries a declaration that the company will not start Nidhi business until the section 406 declaration is obtained.
- Pick the name carefully. Since 16 July 2024 a company cannot use "Nidhi Limited" until it is declared a Nidhi (G.S.R. 413(E)); test the rest with the Company Name Checker.
- Within 120 days of incorporation, build membership to 200 and net owned funds to ₹20 lakh.
- File NDH-4 with the member list (with PAN, address and deposits), a certificate from two directors that membership is at least 200, the board resolution, and fit and proper declarations from every promoter and director. A practising CA, CS or cost accountant certifies the form and the auditor declares compliance.
- The Central Government must decide within 45 days; if it does not, the application is deemed approved. It then notifies the company as a Nidhi in the Official Gazette.
- File the approval with Form INC-20A and only then start taking deposits.
A company that misses the 120-day route cannot file SH-7 or PAS-3, so it cannot change its share capital or report new allotments.
The fit and proper test for Nidhi promoters and directors
Every promoter and director must declare that they are fit and proper, judged on integrity, honesty, reputation and character, and on a list of disqualifications in rule 3B(3) of G.S.R. 301(E). One disqualified person can sink the NDH-4.
A person fails the test if any of these apply:
- A pending criminal complaint or FIR filed by a person authorised by the Central Government.
- A pending charge sheet by an enforcement agency in an economic offence.
- A regulator's restraint or debarment order in company, securities or financial market matters.
- A conviction for an offence involving moral turpitude.
- Being an undischarged insolvent, of unsound mind as found by a court, a wilful defaulter or a fugitive economic offender.
- Being a director in five or more Nidhis, or a promoter of three or more.
What a declared Nidhi can and cannot do
Deposits and loans run on fixed terms. Fixed deposits are for 6 to 60 months and recurring deposits for 12 to 60 months (rule 13). Loans go only to members, against gold, silver, jewellery, immovable property, fixed deposits, NSCs, government securities or insurance policies (rule 15).
Other limits worth printing for the board:
- Loan size. ₹2 lakh per member while total deposits are under ₹2 crore, rising to ₹15 lakh above ₹50 crore.
- Interest on loans. Not more than 7.5% above the highest deposit rate, on a reducing balance (rule 16).
- Branches. Only after net profit after tax in each of the three preceding years, up to three in the district; more, or any outside the district, need Regional Director approval through NDH-2 (rule 10).
- Banned activities. Chit funds, hire purchase, leasing, insurance, current accounts, advertising for deposits and paying brokerage (rule 6).
- Other companies. A Nidhi cannot buy securities of another company or control its board (rule 6(d)). The 2022 amendment removed the earlier route through a special resolution and Regional Director approval.
Compliance after NDH-4 approval
A Nidhi files Form NDH-3 every half year, within 30 days of the half year ending, certified by a practising CS, CA or cost accountant (rule 21). Its auditor certifies compliance with the Nidhi Rules every year (rule 22), alongside the AOC-4 and MGT-7 filings every public company makes; see company annual compliance.
Keep three numbers under watch all year: at least 200 members (rule 8(2)), at least ₹20 lakh of net owned funds (rule 9), and the 10% liquid reserve (rule 14). The ROC compliance calendar sets out the company filings.
Breaking the rules costs the company and each officer in default up to ₹5,000, plus up to ₹500 a day while it continues (rule 24). The Central Government can also appoint a Special Officer to take over management after a hearing (rule 23, as amended in 2019).
Forms NDH-1 and NDH-2 extensions under rule 5 do not apply to a company incorporated as a Nidhi on or after 19 April 2022 (rule 5(5)). Older guides that describe a one-year window and NDH-4 "within 60 days" are out of date.
How Ofin handles Nidhi company registration
Ofin's CAs and CSs incorporate the public company, plan the route to 200 members and ₹20 lakh, prepare the fit and proper declarations and file NDH-4, 100% online. The package covers 7 Class 3 DSCs, 3 DINs, name approval, stamp duty on ₹10 lakh of authorised capital, PAN, TAN and the incorporation file. We quote a fixed fee after reviewing your plan, reply within 24 hours and can send a fixed-price proposal.
