Nidhi Company Registration

What it may and may not do

• May accept deposits from and lend to its own members only
• May lend only against gold, silver, immovable property, deposits and government securities
• May not carry on chit fund, hire purchase, insurance or securities business
• May not issue preference shares or debentures
• May not open a current account for its members
• May not accept deposits from or lend to a body corporate
• May not enter into a partnership for its lending business

The post-incorporation thresholds

Incorporation requires seven members and three directors, with minimum equity share capital. Within the period the rules prescribe after incorporation, the company must satisfy further conditions — a minimum number of members, a minimum net owned fund, and a ratio of net owned funds to deposits.

Form NDH-4 must then be filed to have the company declared as a Nidhi. A company that fails to meet the thresholds is not entitled to the declaration and cannot continue accepting deposits, which is where most failed Nidhi ventures come unstuck.

Ongoing compliance

• Form NDH-1, the return of statutory compliances, annually
• Form NDH-2, where an extension is sought for meeting the member or fund thresholds
• Form NDH-3, the half-yearly return
• Standard company filings in Forms AOC-4 and MGT-7
• Income tax return in Form ITR-6
• Maintenance of the prescribed ratio between net owned funds and deposits

Be clear about what this is not

A Nidhi company is not a bank, not a non-banking financial company, and not a route to accepting public deposits at scale. It is a members-only mutual benefit structure with tight lending restrictions.

Where the intention is genuinely to carry on lending as a business, a non-banking financial company registered with the Reserve Bank is the appropriate vehicle, with the capital and compliance that entails. We will say so rather than incorporating a structure that cannot lawfully do what you intend.

How we handle it

1. 1 Testing the intention We establish whether a Nidhi structure can lawfully do what you intend, or whether a non-banking financial company is the correct vehicle.
2. 2 Digital signatures and identification Signing certificates and director identification numbers are obtained.
3. 3 Name reservation A name ending with Nidhi Limited is reserved.
4. 4 Incorporation The company is incorporated as a public company with the prescribed capital and member base.
5. 5 Meeting the thresholds We plan the member and net owned fund build-up within the prescribed period, since failure here is fatal.
6. 6 NDH-4 declaration The application to be declared a Nidhi is filed once the thresholds are met, and the ongoing return calendar set up.

Frequently asked questions