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Chapter XXVI, Section 406 of the Companies Act, 2013 deals with the provision of Nidhis. It defines Nidhi as a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending its members only, for their mutual benefit and which complies with such rules as are prescribed by the Central Government for regulation of such class of companies.

The Nidhi Rules 2014 gives a detail description of the incorporation of a Nidhi. Let us see how the registration of a Nidhi company is being done.


  • The Minimum number of shareholders for a Nidhi at the time of registration shall be seven (7) which shall increase up to at least two hundred (200) by the end of the first year.
  • The number of Directors required for the registration is three (3).
  • A minimum capital of five lakh Indian Rupees (INR 5, 00, 000) is required.
  • Director Identification Number (DIN) and Digital Signature Certificate (DSC) are necessary as well.
  • No preference shares are to be issued.

After the Registration:

  • Net owned funds should be more than ten lakhs in Indian Rupees.
  • The ratio for net owned funds should be more than 1:20.
  • Unencumbered deposits should exceed 10% of outstanding deposits.


Step 1:

The Directors of the Nidhi Company have to apply for Director Identification Number and the Digital Signature Certificate. DIN is issued by the Ministry of Corporate Affairs and DSC is required for all e-filing processes. It takes around 2 days to procure the DSC and both of these requirements are necessary to check the authenticity of the documents submitted.

Note: the directors who already have DIN and DSC do not need to apply for the same and can directly start from Step 2.

Step 2:

After successfully receiving the DIN and DSC, a person has to file an application in INC-1 for reservation along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 of the name of Nidhi Company to the Ministry of Corporate Affairs (MCA). 3 names are to be suggested to the MCA out of which one gets accepted for the name of the company. The name suggested must not be similar to the name of other companies and be unique, nor should it be against the rules of Central Government. Every company incorporated as Nidhi shall have the last word “Nidhi Limited” as part of its name.

Step 3:

As soon as the name is approved by the MCA, Memorandum of Association (MOA) and Articles of Association (AOA) are prepared. They contain the objective of incorporating a Nidhi Company and are filed to the Registrar of Companies (ROC).

Step 4:

The next step is to take a Certificate of Incorporation (CIN). This is a unique identification number assigned by the Registrar of Companies and is a 21 digits alpha-numeric code. A CIN is required to be provided on all the transactions a company involves in with Registrar of Companies. It is used for identifying or tracking companies for several level of information which the Registrar or the Ministry of Corporate Affairs holds.

Step 5:

The next step involves application for Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) which is generally received within 7 working days. The application for this is made separately other than the SPICe. Failure to quote TAN in documents can result in penalty. A bank account needs to be opened after this by submitting Certificate of Incorporation, MOA, AOA and PAN to the bank.

Step 6:

Goods and Services Tax registration comes lastly. It is a mandatory step that needs to be followed for all the businesses that exceed the limit of profits or turnover. Failure to do so for the evasion of tax is an offence subjected to penalties, prosecution and jail term.

MCA has issued an integrated incorporation form which is available online. The Ministry has also simplified the process by providing proforma for incorporating company electronically which is also known as SPICe.


Following documents are required for incorporation of a Nidhi:

  1. Identity Proof of Directors and Shareholders

In case of Indian Nationals: PAN card, In case of Foreign Nationals: Notarized passport copy

  1. Address Proof of Directors and Shareholders

Aadhar card, Driving License, Passport, Electricity Bill, Bank Statement, Voter Id, etc

  1. Proof of Registered Office in India

Property tax receipt, Rental Agreement or sales deed, Non Objection Certificate by landlord for the use of premises as registered office

Note: At least 2 documents must be valid, recent and not older than 2 months for both Address proof and proof of registered office.

  1. Signed Incorporation Documents

Signed Digital Signature Application in hard copy, other such documents signed and uploaded in soft copy


  • NDH-1 Form A Nidhi company has to submit a list of members within ninety (90) days from the end of every financial year.
  • NDH-2 Form A Nidhi company can request Ministry of Corporate Affairs for an extension by filing this form in case it is unable to add more than two hundred (200) members in its financial year
  • NDH-3 Form Apart from NDH 1 and NDH 2 Form, a Nidhi Company is required to file a half-yearly return through this form within thirty (30) days of the conclusion of each half-year duly certified by practicing professional
  • MGT-7 A Nidhi Company has to file its Annual Returns with the Ministry of Corporate Affairs through this form
  • AOC-4 This form is for submission of the financial statements and other related documents
  • ITR-6 Like every other businesses, a Nidhi Company, must file its annual Income Tax Returns by the 30th September of the following financial year


No Nidhis shall-

  1. Carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate;
  2. Issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever;
  3. Open any current account with its members;
  4. Acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or 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 such Nidhi;
  5. Carry on any business other than the business of borrowing or lending in its own name;
  6. Accept deposits from or lend to any person, other than its members;
  7. Pledge any of the assets lodged by its members as security;
  8. Take deposits from or lend money to any body corporate;
  9. Enter into any partnership arrangement in its borrowing or lending activities;
  10. Issue or cause to be issued any advertisement in any form for soliciting deposit;

Pay any brokerage or incentive for mobilising deposits from members or for deployment of funds or for granting loans.


  1. The Director shall be a member of Nidhi.
  2. The Director of a Nidhi shall hold office for a term up to 10 consecutive years on the Board of Nidhi.
  3. The Director shall be eligible for re-appointment only after the expiration of 2 years of 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 of sub-section (4) of Section 152 of the Companies Act and shall not have been disqualified from appointment as provided under Section 164 of the Act.


  1. A Nidhi may open branches, only if it has earned profits after tax continuously during the preceding 3 financial years.
  2. A Nidhi may open up to 3 branches within the district.
  3. If a Nidhi proposes to open more than 3 branches or any branch outside the district, it shall obtain the prior permission of the Regional Director and intimation is to be given to the ROC about opening every branch within 30 days of such opening.
  4. No Nidhi shall open branches or collection centres or offices or a deposit centre outside the State where it is registered office is situated.
  5. No Nidhi shall open branches or collection centres or offices or deposit centres unless financial statement and annual return (up to date) are filed with the Registrar.
  6. A Nidhi shall not close any branch unless it-
  1. 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, informing the public about such closure;
  2. 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 such advertisement was published;
  3. Gives intimation to the Registrar within 30 days of such closure.


What differentiate a Nidhi Company from other companies and non-banking financial companies is its dealings with deposits from its members and loans to its members only. It primarily works for the mutual benefits of its members. A Nidhi Company is to encourage frugality and encourage savings. Reserve Bank of India has powers to issue directives to a Nidhi as it comes under the category of Non-banking Financial Companies (NBFC), moreover, because these Nidhis deal with their members only, they are exempted from the core provisions of the RBI Act and other directions that are applicable to other NBFCs. Therefore, a Nidhi Company is an ideal legal entity to take a deposit from a specific group of people and lend to them.

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