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All about Nidhi Company Registration in India

What is Nidhi Limited Company?

Nidhi Limited Company is defined under Section 406 of Companies Act, 2013 and Companies (Nidhi Companies) Rules, 2014. Nidhi Limited Company Registration is most affordable type of registration for those who want to run their finance and loan business does not required RBI approval. Due to non involvement of Reserve Bank of India, it becomes easy to have Non Banking Finance Services with the objective of cultivating the habit of thrift and savings amongst its members.

Nidhi Limited Companies are allowed to borrow deposit from its members and lend to its members only. Therefore, the funds contributed for a Nidhi Limited Companies are only from its members (shareholders) and used only by the shareholders of the Nidhi Limited Companies. Nidhi ltd. Companies accept deposits from its members only and lend to its members only in the form of secured loan with a reasonable interest rate as compare to other money lenders. The basic idea of Nidhi ltd. Company is to save its members from the exploitation of money lenders who charge high interest rates.

Things need to know before starting a Nidhi Limited Company.

  • A Nidhi ltd. Company can be start with minimum capital of Rs. 500,000 subject to condition that within time period of 1 year the capital shall be Rs. 10, 00,000.
  • Every Nidhi ltd. Company shall be treated as Public Limited Company and shall have minimum 3 directors and 7 shareholders. However the shareholder may director and vice versa.
  • Every Nidhi ltd. Company shall have atleast 200 members within a year.
  • A Nidhi Limited Company can open only 3 branches in a state and cannot operate outside the state.
  • A Nidhi Limited Company cannot issue preference shares. If already issues, such shares are to be redeemed in accordance with the terms of the issue of such shares.
  • The ratio of net owned funds to deposits cannot be more than 1:20. A Nidhi Limited Company is allowed to take the maximum of 20 times the net owned fund. Net owned fund means the total fund invested by the owner less any accumulated loss. For example, if you have invested Rs.1 crore, then you are entitled to raise funds up to Rs.20 Crore.
  • Unencumbered term deposits of not less than 10% of the outstanding deposits as specified in Rule 14.
  • A Nidhi Limited Company can open up to 3 branches after three years of continuous profit running of the business. Further, these three branches can be opened within the district only. Further, to open any branch outside the district, you will require the Regional Director (RD) permission. Also, a Nidhi Limited Company cannot open a branch outside the state.
  • Nidhi Limited Companies are not authorized to promote its activities through any kind of advertisement. This is done because the main object of Nidhi is to promote the habit of thrift and saving habits among its member and not to solicit deposits through promotions to non-members.
  • Similarly, Nidhi Company is not authorized to remit any kind of brokerage or incentive for promotion or mobilization of deposits to members or granting loans.
  • Nidhi Limited Company cannot purchase securities/shares of other organizations or institutions.


What are the restricted areas of Nidhi Limited Company?

As per Rule 6 after successful Nidhi Limited Company registration it is not allowed to:

  • Carry on the business of chit fund, leasing finance or acquisition of securities
  • To issue preference shares, debentures or any other debt instruments
  • Open a current account with its members
  • Acquire another company by purchasing securities of the company
  • Carry on any other business other than borrowing and lending to its members.
  • Accept deposit from a person who is not its member
  • Lend or take a deposit from a corporate
  • Enter into a partnership for borrowing or lending activities
  • Issue advertisements for soliciting deposits
  • Pledge assets of its members kept as a security
  • Pay commission or incentive for mobilizing deposits.


What should keep in mind while selecting name of company?

Name selection is the main part for any kind of company registration. Select a unique name which is not similar or nearby to any existing company name and shall have not registered with the Trademark authority. The name must have good recall value, which can easily remember. And the suffix will be “Nidhi Limited”. For example “ABC Nidhi Limited”.

What are condition regarding loans and deposits under Nidhi Limited Company?

  • Nidhi Limited Company can lend three types of loans; gold loan property loan, others (LIC, FD etc.).
  • Nidhi Limited Company cannot engage micro finance business but can lend secured loan @20% interest.
  • Nidhi Limited Company can take legal action if any member failed to repay any sum of money.
  • Nidhi Limited Company can accept three types of deposits; Fixed deposit (FD), recurring deposit (RD) & Savings.
  • Nidhi Limited Company can pay interest up to 12.5% on FD & RD and 6% on savings accounts.
  • Nidhi Limited Company can take deposits up to 20 times the funds invested. Invest 5 lakh and accept 1 Cr.


Every Nidhi Ltd Company must have complied certain compliances as prescribed by Income tax authority and Ministry of Corporate Affairs. In case of any non compliance heavy late fees shall be applicable and other actions also may be take by MCA and Registrar of Companies. Hence, if you are looking to start a Nidhi Company in India, then it is recommended to read all the Nidhi rules, 2014 properly. We the Team Legal Pillers have group of experts comprising CS/CA/Lawyers providing wide range of online business solutions across the country. For more details you may write us on [email protected] or contact us at 9267941961.

Ritesh Mishra

Hi, My name is Ritesh Mishra, a Practicing Advocate having several year experience in Business Consultancy, Secretarial Law, Intellectual Properly Law, Taxation, Business Modeling and other allied matters. I have been serving Small and Big Industries since several years. I have also been serving industry in various kind of licensing and liasoning works across India.

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