Nidhi Company in India — a mutual-benefit deposit society in company form, not a fintech licence
A Nidhi is a company whose business is lending money to, and taking deposits from, its own members only (s.406, Companies Act 2013, read with the Nidhi Rules 2014). It is a mutual-benefit society in company form — not an NBFC, not a bank, and not a route to public lending. The rules are precise: ₹10 lakh net owned funds, 200 members within a year, no deposits from outsiders. This page is the statute-cited version of what actually qualifies.
The four things that matter
Where this structure actually goes wrong.
s.406 — what a Nidhi is allowed to do
Section 406 of the Companies Act 2013 empowers the central government to notify classes of companies as Nidhis, and says a Nidhi must be a company with the sole object of cultivating the habit of thrift and savings among its members, and of lending funds to its members for their mutual benefit. No outsiders: deposits and loans are restricted to members. That single constraint is what separates a Nidhi from an NBFC.
s.406 · members-only deposits & lending · mutual benefit · not an NBFC
Nidhi Rules 2014 — the numbers that matter
The Nidhi Rules 2014 set the hard requirements: net owned funds of not less than ₹10 lakh (Rule 5, raised to ₹20 lakh for existing Nidhis under the 2022 amendment framework), at least 200 members within one year of incorporation, and a net owned funds to deposit ratio of at least 1:20. A Nidhi cannot accept deposits from non-members, and deposits are primarily from individuals — corporate memberships are tightly restricted.
Nidhi Rules 2014 Rule 5 · ₹10L NOF · 200 members in 1 year · 1:20 ratio
The MCA compliance treadmill that kills the status
Nidhis are among the most notice-prone company forms. Filings include annual return, audited financials, Form NDH-1/NDH-2/NDH-3 for changes and compliance certificates, and the continuing 1:20 ratio, 10% unencumbered deposit requirement (Rule 14), and 15% reserve maintenance. Miss the filings and the company can lose its Nidhi status or face strike-off under the Companies Act.
NDH-1/2/3 · Rule 14 (10% unencumbered) · 15% reserves · strike-off risk on default
Nidhi vs NBFC — the line nobody explains
An NBFC is registered with the RBI under s.45-IA of the RBI Act and can lend to the public; a Nidhi is registered with the MCA under s.406 of the Companies Act and can only deal with members. A Nidhi does not need RBI registration because it is not in the business of lending to the general public — but the moment it lends to a non-member, it is operating as an unregistered NBFC and is in serious regulatory trouble.
Nidhi = MCA (s.406) · NBFC = RBI (s.45-IA) · lending to outsiders = illegal NBFC
Brutally honest
Where it wins. Where it hurts.
- ✓Legitimate members-only deposit and lending vehicle without an RBI licence
- ✓Low minimum threshold — ₹10 lakh net owned funds to start (Rule 5, Nidhi Rules 2014)
- ✓Encourages genuine community savings in under-banked communities
- ✓Exempt from many RBI NBFC directions because it is not an NBFC
- ✗Strictly members-only — no public deposits, no public lending, no fintech
- ✗200 members required within one year of incorporation (Rule 5)
- ✗Net owned funds to deposits ratio of at least 1:20, maintained continuously
- ✗Heavy MCA filing regime (NDH forms, annual filings, compliance certificates) — and loss of Nidhi status for non-compliance
- ✗Do not confuse with an NBFC licence — RBI will shut down non-member lending
Community savings groups, employee thrift societies, and regional mutual-benefit organisations that genuinely want members-only deposit-and-loan activity. If the plan is public lending or an app-based loan business, the correct route is an NBFC — not a Nidhi.
Fintech startups, lenders targeting the general public, or anyone who thinks Nidhi status is a cheaper way to be a bank. It is not.
What we actually do
Five tracks, start to finish.
- 01Nidhi incorporationOne-time
SPICe+ incorporation as a Nidhi with the Nidhi-specific objects in the MoA, and the initial capital structure meeting the ₹10L NOF requirement.
- 02200-member & ratio complianceFirst year
Member onboarding to hit 200 within one year, and a compliance framework that keeps the 1:20 NOF-to-deposit ratio and 10% unencumbered deposit requirement (Rule 14) intact.
- 03Annual MCA filingsAnnual
Annual return, audited financials, NDH-1/NDH-2/NDH-3 filings, and the compliance certificate that confirms Nidhi status is being maintained.
- 04Nidhi status defenceQuarterly
Pre-emptive checks against the conditions that trigger loss of Nidhi status — outsider deposits, ratio breach, or missed filings — before notices arrive.
- 05Restructuring out of NidhiAs needed
If the business actually needs public lending, we map the conversion path to an NBFC (RBI s.45-IA) or the wind-down of the Nidhi, before regulators do it for you.
Common questions
Statute-cited answers.
What is a Nidhi company in simple terms?+
A Nidhi is a company whose only business is taking deposits from and lending to its own members — a mutual-benefit savings society in corporate form, governed by s.406 of the Companies Act 2013 and the Nidhi Rules 2014. It is not a bank (it cannot lend to the public), and it is not an NBFC (it is not registered with the RBI). Deposits come only from members, and loans go only to members.
What are the minimum requirements to be a Nidhi?+
Under Rule 5 of the Nidhi Rules 2014: net owned funds of not less than ₹10 lakh (with the 2022 amendment framework raising the bar for existing Nidhis), at least 200 members within one year of incorporation, and a ratio of net owned funds to deposits of at least 1:20. Rule 14 additionally requires 10% of deposits to be maintained in unencumbered term deposits with a scheduled bank, and the rules require maintaining reserves as prescribed.
Can a Nidhi lend money to non-members?+
No. The entire legal basis of a Nidhi under s.406 of the Companies Act 2013 is mutual benefit among members — deposits from and loans to members only. Lending to a non-member makes the company operate as an NBFC without RBI registration, which is a violation of the RBI Act (s.45-IA) with serious consequences. This is the single most common way Nidhis get into regulatory trouble.
Is a Nidhi the same as an NBFC?+
No. An NBFC is a company registered with the RBI under s.45-IA of the RBI Act 1934 that is in the business of lending or financial activity with the general public. A Nidhi is registered with the MCA under s.406 of the Companies Act 2013, deals only with members, and is explicitly not an NBFC. If you need public lending, you need an NBFC registration — a Nidhi cannot be converted into one.
What happens if a Nidhi fails to maintain compliance?+
The company can lose its Nidhi status — the central government can de-notify it under the Nidhi Rules, after which it becomes an ordinary company that is suddenly holding deposits it is no longer lawfully entitled to hold. Repeated non-filing can also trigger strike-off or action under the Companies Act. The MCA filing regime (annual return, audited accounts, NDH-1/2/3) is non-negotiable even at zero activity.
Want to know if a Nidhi is right — or whether you have been running one illegally?
We assess whether your deposit-and-loan model is genuinely members-only, confirm you meet the Nidhi Rules 2014 thresholds, and either get the compliance right or map the correct NBFC route.