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Nidhi Company- Points to remember after Registration

Requirement after Incorporation: 

Every Nidhi Company shall, within a period of one year from the commencement of these rules, ensure that it has—

  1. Minimum number of members should be 200;
  2. Net owned funds shall be Rs.10,00,000/- or more (‘Net owned funds’ means the aggregate of paid up equity share capital and free reserved as reduced by the accumulated and intangible assets appearing in the last audited balance sheet);
  3. Ratio of net owned funds to deposit shall be not more than 1:20;
  4. Unencumbered term deposits of not less than 10% of the outstanding deposits  as specified in Rule 14;

As per Rule 6 of Nidhi rule, nidhi company cannot start or continue the following business

  1. Chit Fund,
  2. Hire Purchase Finance,
  3. Leasing Finance,
  4. Insurance or Acquisition of Securities issued by anybody corporate;

As per the rule no Nidhi Company can

  1. issue
  1. Preference Shares,
  2. Debentures or
  3. Any Other Debt Instrument by any name or in any form whatsoever;
  4. Open any Current Account with its members;
  5. Acquire another company by;
  6. Purchase of securities or
  7. Control the composition of the Board of Directors of any other company in any manner whatsoever or
  8. Enter into any arrangement for the change of its  management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over Nidhi;
  9. Carry on any business other than the business of borrowing or lending in its own name;
  10. Accept Deposits from or lend to any person, other than its members;
  11. Pledge any of the assets lodged by its members as security;
  12. Take Deposits from or lend money to anybody corporate;
  13. Enter into any Partnership Arrangement in its borrowing or lending activities;
  14. Issue or cause to be issued any advertisement in any form for soliciting deposit;
  15. Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or the granting loans.

Nidhi’s which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding 20% twenty per cent of the gross income of the Nidhi at any point of time during a financial year.


  1. A Nidhi Company shall not issue shares to a body corporate or trust.
  2. Except as otherwise permitted under these rules, every Nidhi shall ensure that its membership is not reduced to less than 200 members/share holders at any time.
  3. A minor shall not be admitted as a member/shareholder of Nidhi.
  4. But deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.

Share capital and allotment

  1. As per Rule 7, every Nidhi Company shall issue equity shares of the nominal value of not less than Rs.10/- each. 
  2. No service charge shall be levied for issue of shares.
  3. Every Nidhi shall allot to each deposit holder at least a minimum of 10 equity shares or shares equivalent to Rs.100/-.
  4. A savings account holder and a recurring deposit account holder shall at least 10 equity shares of Rs.10/-.

Acceptance of deposits:

  1. A Nidhi shall not accept deposits exceeding 20 times of its Net Owned Assets as per last audited financial statements.
  2. The fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of 60 months.
  3. Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period of 60 months.
  4. In case of recurring deposits relating to mortgage loans, the maximum period of recurring deposits shall correspond to the repayment period of such loans granted by Nidhi.
  5. The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed Rs.1,00,000/- and the interest shall not exceed 2% above the rate of interest payable to savings bank account by nationalized banks.
  6. Interest for fixed and recurring deposits shall be at a rate not exceeding the maximum rate of interest prescribed by RBI which the NBFC can pay on their public deposits.
  7. Every Nidhi shall invest and continue to keep invested, in unencumbered term deposits with a scheduled commercial bank or post office deposits in its own name an amount which shall not be less than 10% of the deposits outstanding at the close of the business on the last working day of the second preceding month.

In case of unforeseen commitments, temporary withdrawal may be permitted with the prior approval of the Regional Director for the purpose of repayment to depositors, subject to such conditions and time limit which may be specified by the Regional Director to ensure restoration of the prescribed limit of 10%


A Nidhi Company shall provide loans only to its members.  The loans given to a member shall be subject to the following limits:

  1. Rs.2,00,000/- where the total amount of deposits from members is less than Rs.2 crores;
  2. Rs.7,50,000/- where the total amount of deposits from its members more than Rs.2 crores but less than Rs.20 crores;
  3. Rs.12,00,000/- where the total amount of deposits from its members is more than Rs.25 crores but less than Rs.50 crores;
  4. Rs.15,00,000/- where the total amount of deposits from its members is more than Rs.50 crores.

A Nidhi Company shall give loans to its members only against the following securities, namely:—

  1. Loans to the members shall be given against the securities of gold, silver and jewellery and immovable property.
  2. Repayment period of such loan shall not exceed one year in case of gold, silver and jewellery.
  3. In case of immovable property the loan shall not exceed 50% of the value of the property offered as security and the period of repayment of such loan shall not exceed 7 years.
  4. Loan may be given against the fixed deposit receipts, National Savings Certificates and other Government securities and insurance policies.

The rate of interest to be charged on any loan shall not exceed 7.5% above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method.

(3) For the purposes of sub-rule (2), the amount of deposits shall be calculated on the basis of the last audited annual financial statements


  1. A Nidhi Company  shall not declare dividend exceeding 25% or
  2. Such higher amount as may be specifically approved by the Regional Director for reasons to be recorded in writing and further subject to the following conditions-
  3. An equal amount is transferred to General Reserve;
  4. There has been no default in repayment of matured deposits and interest; and
  5. It has completed with all the rules as applicable to Nidhis.


  1. The director shall be a MEMBER of Nidhi.
  2. He shall hold office for a term up to 10 consecutive years on the Board.
  3. He shall be eligible for re-appointment only after the expiration of 2 years ceasing to be a director.
  4. Where the tenure of any director in any case had already been extended by the Central Government it shall terminate on expiry of such extended tenure.
  5. The person to be appointed as a Director shall comply with the requirements ofSection 152(4) of the Act and shall not have been disqualified as provided in Section 164 of the Act.


  1. A Nidhi may open branches only if it has earned net profits after tax continuously during the preceding three financial years.
  2. The company may open up to 3 branches only within the district.
  3. If it proposes to open more than 3 branches within the district or any branch outside the district, it shall obtain prior permission of the Regional Director and intimation is to be given to the Registrar about opening of every branch within 30 days of such opening.
  4. No Nidhi shall open branches or collection centers or offices or deposit centers, or by whatever name called outside the State where its registered office is situated.
  5. Further branches or collection centers or offices or deposit centers shall be opened unless financial statement and annual return are filed with the Registrar.

Closure of Branch:

  1. A Nidhi shall not close any branch unless:
  2. It publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least 30 days prior to such closure.
  3. Informing the public about such closure; fixes a copy of such advertisement or a notice informing such closure of the branch on the notice board of Nidhi for a period of at least 30 days from the date on which advertisement was published and
  4. Gives intimation to the Registrar within 30 days of such closure.


  1. Within 90 days from the closure of the first financial year after its incorporation and where applicable, the second financial year, Nidhi shall file a return of statutory compliances in Form NDH – 1 along with such fee as prescribed with the Registrar duly certified by a Company Secretary in practice or a Chartered Accountant in practice or a Cost Accountant in practice.
  2. If the company is not complying with the above it shall within90 days from the close of the first financial year, apply to the Regional Director in Form NDH -2 along with fee for extension of time and
  3. The Regional Director may consider the application and pass orders within 30 days of the receipt of the application.
  4. If there is failure the Nidhi shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions besides being liable for penal consequences provided in the Act.

Rule 9 -Every Nidhi shall maintain Net Owned Funds (excluding the proceeds of any preference share capital) of not less than ten lakh rupees or such higher amount as the Central Government may specify from time to time.


Gayatri Dhote

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