Nidhi Company

Why you should Start a Nidhi Company in India?

calendar03 Nov, 2020
timeReading Time: 4 Minutes
Lets Start a Nidhi Company in India

The term “Nidhi” means wealth in the traditional context. However, to start a Nidhi Company, in the financial sector, pertains to a type of company recognized u/s 406 of the Companies Act, 2013. There are different names, such as Benefit Funds, Permanent Funds, Mutual Benefit Companies, and Mutual Benefit Funds. These companies are governed by the Ministry of Corporate Affairs (MCA), and the RBI is authorizedto direct them time to time in matters similar to their financial activities. Nidhi Companies are immensely prevalent in South India, and almost 80% of such companies are present in Tamil Nadu itself.

An Overview on Nidhi Company Registration

To start a Nidhi Company in India is less complicated when correlated to different types of financial companies such as NBFCs. However, a Nidhi Company must satisfy the following pre-registration criteria within one year of Nidhi Company Registration, to be able to incorporate itself. The criteria are as follows-

  • The company should have 200 members atleast;
  • It shall have a net reserved fund of INR 10 Lakh. and at least 10% of its outstanding deposits should come from full term deposit;
  • The maximum ratio of fund to deposits should be 1:20;
  • No corporate body or minor can be a member of the Nidhi Company.

Read our article:Guide on Benefits of Nidhi Company Registration in India

Requirements to start a Nidhi Company

  • The company that has to be incorporated under this Act shall be a public company;
  • It must have a minimum paid-up equity share capital of Rs.5,00,000/-;
  • There will be no issue of preference share capital. In case the company had issued such shares before the commencement of Act, preference shares are to be redeemed by the terms of issue of claims;
  • The purpose of such kind of firm will be to give members a habit of economy and saving, and the services will only be confined to its members;
  • The name must have Nidhi Limited

Now, you must be wondering that what are the requirements to start a Nidhi Company. Every Nidhi Company within one year from the initiation of these rules, ensure that it has a minimum membership of 200 people. It must also assure that net retained funds are Rs. 10,00,000 or more (‘net owned funds’ mean the aggregate of paid-up equity share capital and free reserve as concentrated by the accrued and intangible assets arising in the last audited balance sheet).

It must also guarantee that the ratio of net reserved funds to deposit is not more than 1:20, imaginative term deposits should not be less than 10% of the leading deposits, thus defined in Rule 14.

Rule 6 Provides General Restrictions to start a Nidhi Company

According to this rule, no Nidhi shall:-

  • Carry out the company of Chit Fund, Hire Purchase Finance, Leasing Finance, Insurance or Acquisition of Securities issued by anybody corporate;
  • Issue of Preference Shares, Debentures, and any other debt instrument by any name or in any form whatsoever;
  • Open any Current Account with its members;
  • Obtain another company by purchase of securities or Check the composition of the Board of Directors of any other company in any manner whatsoever;
  • Access to any arrangement for the change of its management, unless it has enacted a special declaration in its general meeting and also obtain the previous support of the Local Director authority over having Nidhi;
  • Carry out any business other than the business of borrowing or lending in its name;
  • Receive deposits from or lend to any person, other than its members;
  • Must not vouch for any of the assets that have been lodged by its members as security;
  • Take Deposits or lend money to any corporate body;
  • Enrol into any Partnership Arrangement in its borrowing or lending activities;

It’s important to note that Nidhis which have adhered to all the requirements of these rules may payout facilities of lockers to its members. The rent must not exceed 20% of the gross income of the Nidhi at any point of time during a financial year.

Applicability to Start a Nidhi Company

The Centre made ‘Nidhi Rules, 2014’ to carry out the objectives of ‘Nidhi’ companies. These rules shall apply to:

Applicability of Nidhi Registration

Advantages of a Nidhi Company

In order to nurture the noble habit of savings, there are numerous advantages to start a Nidhi Company. Let’s go through some of these-

Limited Capital Requirement

As stated in the Nidhi Company Rules, 2014, the minimum capital requirement for Nidhi Company Registration is INR 10 Lakhs.

Less RBI Regulatory Compliance

Nidhi Companies combines similar lines to that of Public Limited Companies. And so, no RBI consent is required to register such company. They are required to comply with the less stringent Nidhi Rules, 2014 and the Companies Act 2013[1] for their activities. As RBI has issued these companies from strict compliance of its core provisions. They can get help from the comfort of regulatory compliances.

Simple Procedure of Formation

The process of starting a Nidhi Company is reasonably easy and is void of severe legal complications. It would help if you had seven members originally; a few simple documents and go through an easy registration process to organize your company with the Ministry of Corporate Affairs.

Uninterrupted Operations

The Company can assure uninterrupted operational existence even at the death or departure of any member. The company will remain irrespective of the necessary change in any membership.

More Certainty

This means that ‘Nidhi Business” is about saving money because a member of Nidhi Company has a habit of saving their money. Interest of starting Nidhi Business in India is very common these days.


The Nidhi Company Corporation is trending in the Indian financial market in these days. Considering the advantages to start a Nidhi Company, it’s no wonder to find why more and more people are preferring the “Nidhi Route” to start their financial businesses in India. If you want to register for Nidhi Company then feel free to contact our experts at Corpbiz.

Read our article:A Comprehensive Guide to Nidhi Company Rules and Regulations

Sakshi Srivastava

Sakshi has pursued B.B.A.LL.B.(IPR Hons.). She is an avid reader and is keen to gather and share her knowledge on the subjects relating to IPR, Company Law and GST. Priorly she has worked as a legal researcher and vide her articles she aims at improving the core knowledge of the subjects to the masses.

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