Nidhi Company: Rules, Registration Process, Capital and NDH-4 Compliance
A Nidhi Company is a public company that takes deposits from its members and lends only to those
same members, for their mutual benefit, under Section 406 of the Companies Act, 2013 and the
Nidhi Rules, 2014. To start one, you incorporate a public company, enrol at least 200 individual
members and meet the capital condition, then apply in Form NDH-4 for a
declaration from the Central Government. You may begin business only after that approval. Once
running, you file NDH-1 annually and NDH-3 every half-year. If your plan is to lend to the
general public or run a microfinance business, a Nidhi is the wrong vehicle, and the comparison
with an NBFC below explains why.
Minimum Members
200 Individuals
Net Owned Funds (to Apply)
₹20 Lakh
NDH-4 Window
Within 120 Days of Incorporation
Key Takeaways
A Nidhi lends and borrows only from its own members. Lending to non-members is
prohibited.
A company incorporated after 19 April 2022 must apply in Form NDH-4 within 120 days
of incorporation, with at least 200 members and net owned funds of ₹20 lakh, as
MCA-based summaries of Rule 3B report.
Business can start only after the Central Government approves NDH-4. The decision
is reported to come within 45 days of the application.
Deposits are capped at 20 times net owned funds, and loans must be secured.
Annual and half-yearly filings are NDH-1 and NDH-3, alongside the normal ROC
returns.
What a Nidhi company is, and what it is not
The idea is old and simple: a group of members pool savings and lend to each other against
security, so that nobody outside the group profits. The Nidhi Rules put it this way in their
object clause. The company exists to cultivate thrift and savings among its members, to receive
deposits from them and to lend to them, all for mutual benefit.
It is not a way to lend to the public. A Nidhi cannot advertise for deposits,
cannot accept money from non-members, and cannot make loans to anyone who is not a member. If
your plan is a microfinance business serving outside borrowers, you will need a different
licence. See the NBFC section below.
Nidhi Company Rules 2014: the core conditions
| Requirement |
Rule |
| Company type |
Public company; name must end with "Nidhi Limited" |
| Members |
Individuals only; no body corporate or trust; a minor's deposit can be taken
through a guardian
|
| Minimum members |
200, and the count must never fall below that |
| Net owned funds (NOF) |
₹10 lakh baseline; ₹20 lakh to apply for declaration for companies incorporated
after 19 April 2022, as reported
|
| NOF to deposits ratio |
Deposits cannot exceed 20 times NOF |
| Unencumbered term deposits |
At least 10% of outstanding deposits, held with a scheduled bank
|
| Deposit terms |
Fixed deposits for 6 to 60 months; recurring deposits of at least 12 months
|
| Interest on deposits |
Not above the maximum rate RBI prescribes for NBFCs
|
| Loans |
Members only, secured, within prescribed limits |
| Branches |
After three years of continuous profit, with limits per district
|
Net owned funds means
paid-up equity share capital plus free reserves, reduced by accumulated losses and intangible
assets. The figures above come from the Nidhi Rules and MCA-based summaries such as the one
published by TaxGuru. Rules have changed in 2019 and 2022, so confirm the current text on the
MCA portal before you file.
Minimum capital requirements for a Nidhi company
There is no fixed "minimum authorised capital" in the sense of a single number to deposit. What
matters is net owned funds, and the figure to plan for is ₹20 lakh if you are incorporating now
and want to apply for declaration. The ₹10 lakh figure still appears in the rules as the
baseline that a Nidhi must maintain, and older guides quote it, which is why you will see two
numbers online.
Your NOF also sets your ceiling. With ₹20 lakh of NOF, the 1:20 ratio allows deposits up to ₹4
crore. Put more equity in and your capacity to take deposits grows.
Nidhi company registration process step by step
1
Choose directors and subscribers
As a public company, you need at least seven subscribers and three directors, and at
least one director must be resident in India. Every director needs a DIN and a Class 3
DSC.
2
Name approval
Reserve a name ending in "Nidhi Limited" through SPICe+ Part A. Check it against
existing companies and trademarks first.
3
Draft the MoA and AoA
The objects clause must reflect the Nidhi purpose, and the Articles should carry the
restrictions in the Nidhi Rules on deposits, loans and prohibited activities.
5
Raise equity and enrol members
Build up the NOF and sign up at least 200 individual members. Collect their KYC and
share subscriptions.
6
File NDH-4 within 120 days of incorporation
Attach proof of 200 members and your NOF.
7
Wait for approval
The Central Government's decision is reported to come within 45 days. Do not accept
deposits or lend before it arrives.
8
Start operating within the rules
Open the deposit and loan products, and set up the 10% unencumbered deposit.
If you want help from incorporation through declaration, see our
Nidhi Company Registration Online
service.
NDH-4 form compliance: the declaration that lets you start
NDH-4 is the application for declaration as a Nidhi. Three situations apply:
Companies incorporated after 19 April 2022: apply within 120 days
of incorporation after meeting the member and NOF conditions, as noted above.
Companies incorporated earlier and functioning like a Nidhi without a
declaration:
the rules set separate timelines, in the 2019 amendment, to apply for
declaration.
Older Nidhis declared before 2014: these update their status
through NDH-4 under Rule 23B.
If NDH-4 is
rejected, a company cannot file Forms PAS-3 and SH-7 for share issues, and any deposit it has
taken is treated as raised under the general deposit provisions of Chapter V of the Companies
Act. You can refile once the compliance gaps are fixed, but the delay costs time and
credibility.
Compliance after declaration: NDH-1, NDH-2 and NDH-3
| Form |
What it is |
Due date |
| NDH-1 |
Return of statutory compliances, certified by a practising CA, CS or CMA
|
Within 90 days of the close of the first financial year after incorporation, and
of the second where applicable
|
| NDH-2 |
Application for extension of time to meet the member or NOF conditions
|
As the rules and your position require |
| NDH-3 |
Half-yearly return |
30 October for the period ending 30 September; 30 April for the period ending 31
March
|
| AOC-4 and MGT-7 |
Financial statements and annual return |
Linked to the AGM; see below |
| DIR-3 KYC |
Director KYC |
Three-year cycle |
As a public company, a Nidhi also files its ordinary annual returns. Our page on
ROC Annual Return Filing Online
explains those forms and the penalties for missing them. NDH-1 carries information on members,
deposits, loans and the NOF ratio, so keep your member register and ledgers in order all year.
Deposits and loans: what a Nidhi can and cannot do
Can do:
Accept fixed and recurring deposits from members.
Lend to members against gold, silver or jewellery, immovable property, fixed
deposit receipts or National Savings Certificates.
Open branches after three years of profit, within district limits.
Loan limits, as reported from the rules:
| Total deposits |
Maximum loan per member |
| Below ₹2 crore |
₹2 lakh |
| ₹2 crore to ₹20 crore |
₹7.5 lakh |
| ₹20 crore to ₹50 crore |
₹12 lakh |
| Above ₹50 crore |
₹15 lakh |
Cannot do: run chit funds, hire purchase, leasing or insurance; acquire
securities; advertise for deposits; pay brokerage for mobilising deposits; lend to or deal with
non-members; open current accounts for members; or issue preference shares or debentures.
Benefits of a Nidhi company
No RBI registration. MCA supervises a Nidhi, so you do not carry
the capital and reporting load of an RBI-regulated lender.
Lower capital than an NBFC. NOF of ₹20 lakh is modest next to the
₹10 crore that RBI's scale-based framework sets for most NBFCs by March 2027, so
check RBI's current norms.
Legal identity and limited liability. Members risk only what they
have put in, and the company continues regardless of member changes.
Built-in customer base. Your members are your depositors and
borrowers, so you do not market to strangers.
The trade-offs matter. You need 200 members before you can operate, the
lending limits are low, you cannot serve non-members, and you can never advertise for deposits.
A Nidhi suits a community or thrift model, not a growth lending business.
Nidhi Company vs NBFC
| Point |
Nidhi Company |
NBFC |
| Regulator |
Ministry of Corporate Affairs |
Reserve Bank of India |
| Law |
Companies Act, 2013 and Nidhi Rules, 2014 |
RBI Act, 1934 and RBI directions |
| Who it serves |
Members only |
The public |
| Deposits |
From members, up to 20 times NOF |
Deposit-taking only with RBI permission |
| Loans |
Secured, to members, within limits |
Secured or unsecured, per RBI norms |
| Minimum capital |
NOF of ₹10 to ₹20 lakh |
Higher; ₹10 crore for most categories under RBI's scale-based norms, to be
confirmed with RBI
|
| Registration |
NDH-4 declaration from the Central Government |
Certificate of Registration from RBI |
| Fit |
Thrift and mutual-benefit lending |
Commercial lending, including microfinance |
If your plan involves lending to outsiders or unsecured microloans, you need an NBFC route
instead. Our
NBFC Registration Process
page covers it, and the RBI site publishes the current norms.
Frequently asked questions
Got questions? Find clear answers from our legal & tax compliance team:
A public company that accepts deposits from and lends to its members only, for
mutual benefit, under Section 406 of the Companies Act.
At least 200 individual members, and the count cannot fall below that.
Net owned funds of ₹10 lakh as the baseline, and ₹20 lakh to apply for declaration
for companies incorporated after 19 April 2022, as reported.
The Nidhi Rules are framed for public companies.
The application for declaration as a Nidhi. A new company applies within 120 days of
incorporation.
Only after the Central Government approves NDH-4.
NDH-1 is the annual return of statutory compliances, and NDH-3 is the half-yearly
return.
No. It can neither lend to non-members nor accept their deposits.
No. Loans must be secured against gold, property, fixed deposit receipts or National
Savings Certificates.
Deposits cannot exceed 20 times net owned funds.
No. Only individuals can be members.
No. MCA supervises Nidhis. NBFCs need RBI registration.
Only for lending to its own members against security. Serving outside borrowers
needs an NBFC or another licence.
You cannot file PAS-3 or SH-7, deposits taken are treated under Chapter V, and you
must fix the gaps and refile.
Start your Nidhi company with LegalDev India
Most Nidhi problems begin before incorporation: a plan to lend to non-members, a missed 120-day
window, too few members at filing, or an objects clause that does not match the rules. The Legal
& Tax Compliance Expert at LegalDev India brings more than ten years of experience in Indian
corporate law, MCA filings, company registration and financial compliance to each Nidhi. We
check that the model fits the rules, handle incorporation, draft the MoA and AoA, prepare the
NDH-4 application and set up the NDH-1 and NDH-3 calendar.
Tell us your location, how many members you expect and how much equity you can put in, and we
will confirm whether a Nidhi fits and what the timeline looks like before you commit. Begin with
Nidhi Company Registration Online
at LegalDev India.