Nidhi Company Registration — Rules, Capital & Compliance 2026

A Nidhi company is a form of mutual benefit society incorporated under the Companies Act, 2013, whose entire purpose is to encourage thrift and savings among its members and to lend to those same members. It is the only class of company that can carry on a deposit and lending business without holding an RBI licence, which makes it attractive to community and regional finance promoters. That exemption comes with a tightly drawn rule book, and most Nidhi companies that run into trouble do so because the promoters treated it as an ordinary company.

What a Nidhi company can and cannot do

A Nidhi may accept deposits from and lend money to its members only. Lending must be secured, against categories such as gold, jewellery, immovable property, fixed deposit receipts and specified government securities. Everything else is off limits.

The prohibitions matter more than the permissions. A Nidhi cannot carry on the business of chit funds, hire purchase finance, leasing finance, insurance or the acquisition of securities of a body corporate. It cannot issue preference shares, debentures or any debt instrument. It cannot open a current account for its members, accept deposits from or lend to anyone who is not a member, take up business through an agent, or advertise for deposits. It cannot pledge member assets held as security, or acquire another company by control of the board without a special resolution and prior approval.

Incorporation requirements

• Entity form. It must be incorporated as a public limited company with the object of cultivating the habit of thrift and savings among members, and the name must end with “Nidhi Limited”.
• Members and directors. A minimum number of members and directors is prescribed at incorporation, and the membership must grow to a prescribed minimum within the first year.
• Equity capital. A minimum paid-up equity share capital is prescribed, and only equity shares may be issued.
• Net owned funds. The company must maintain a prescribed level of net owned funds, and a prescribed ratio of net owned funds to deposits on an ongoing basis.

Because the member count, capital floor and ratio thresholds have been revised by amendment more than once, confirm the figures applicable on your incorporation date rather than relying on older commentary. Our Nidhi company registration service page carries the current position.

The registration process

Step 1 — DSC and DIN

Every proposed director obtains a Class 3 Digital Signature Certificate and a Director Identification Number, the latter typically allotted through the incorporation form itself.

Step 2 — Name reservation

Reserve the name through SPICe+ Part A or the RUN facility. The name must end with “Nidhi Limited” and must not be identical or deceptively similar to an existing company or a registered trademark.

Step 3 — File SPICe+ with MOA and AOA

The incorporation is filed through SPICe+ with the memorandum and articles attached. The object clause must state the Nidhi objects specifically — a generic finance object clause will attract objections. PAN, TAN, and the EPFO and ESIC registrations are handled within the integrated form.

Step 4 — Certificate of Incorporation and commencement

On approval the Registrar issues the Certificate of Incorporation. The company must then file the declaration of commencement of business before it can begin operations, and open its bank account and receive subscription money in the prescribed manner.

Step 5 — Form NDH-4 and the first year

Within the prescribed period after incorporation, the company must satisfy the membership, net owned funds and deposit ratio conditions and apply in Form NDH-4 for declaration as a Nidhi. This is the step promoters most often underestimate. If the conditions are not met within the window, the company cannot accept further deposits and faces penal consequences. Treat the first year as a compliance sprint, not a soft launch.

Ongoing compliance

• Form NDH-1 — return of statutory compliances, filed annually with a certificate from a practising professional.
• Form NDH-2 — application for extension of time, where the membership or ratio conditions have not been met.
• Form NDH-3 — half-yearly return.
• AOC-4 and MGT-7 — annual financial statements and annual return, as for any company. See our guide to ROC filing due dates and late fees.
• Statutory audit — applicable, along with the income tax return and any tax audit that applies.
• Branch restrictions — branches may be opened only after the company has earned profits for the prescribed period, and only within limits.

Deposit and lending rules to build into your operations

Deposits are capped as a multiple of net owned funds, and the interest a Nidhi may pay on deposits is capped by reference to the maximum rate payable by other deposit-taking entities. Loans to members are capped by reference to the company’s total deposits, with the individual borrower cap varying with the size of the deposit book. Loans must be secured against permitted asset classes, with prescribed loan-to-value limits, and unsecured lending is simply not permitted. Directors and their relatives cannot be lent to on preferential terms.

Build these limits into the loan approval process rather than testing them at audit. A Nidhi that breaches the deposit ratio is required to stop accepting deposits until it is corrected.

Is a Nidhi the right vehicle?

A Nidhi suits a genuine community of savers and borrowers — a locality, a trade association, an employee group — who want a formal, regulated vehicle to pool and lend savings among themselves without the capital and licensing burden of an NBFC. It does not suit anyone who wants to lend to the public, offer varied financial products, raise institutional debt, or scale nationally. Promoters with those ambitions should be looking at an NBFC licence instead, and should read our guide on NBFC registration and RBI licensing before committing.

Frequently asked questions

Does a Nidhi company need RBI approval?

No. Nidhi companies are notified under the Companies Act and are exempt from the core provisions of the RBI Act that apply to NBFCs, precisely because they deal only with their own members. The RBI retains oversight powers, but no licence application is made to it. Regulation is exercised by the Ministry of Corporate Affairs through the Nidhi Rules.

Can a Nidhi company lend to the general public?

No. Accepting deposits from or lending to non-members is a fundamental breach. Anyone borrowing must first be admitted as a member in accordance with the articles, and membership cannot be granted to a body corporate or a trust.

What happens if we do not reach the minimum member count in time?

The company must apply in Form NDH-2 for an extension. If the conditions are still not met, it is barred from accepting further deposits and becomes liable to penal action, and the promoters may have to consider conversion or closure. This is the single most common failure point.

How is a Nidhi different from a co-operative credit society?

A Nidhi is a company registered with the Registrar of Companies and governed by the Companies Act and Nidhi Rules. A credit co-operative is registered under state or central co-operative legislation with a different regulator, governance model and member framework. The choice usually turns on which regulatory regime and geography you want to operate under. Our Nidhi registration team can walk through the comparison for your specific plan.