Nidhi Company Registration

Form a member-driven NBFC for thrift, savings, and mutual lending under Nidhi Rules, 2014—empowering community financial inclusion.

Overview

Nidhi Company Registration is governed by the Nidhi Rules, 2014, under the Companies Act, 2013, and provides a structured legal framework for entities focused on promoting savings and lending among members. The registration process involves obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN), securing name approval from the Ministry of Corporate Affairs (MCA), and submitting incorporation documents such as the Memorandum of Association (MoA) and Articles of Association (AoA) through Form SPICe+ to obtain a Certificate of Incorporation.

After registration, Nidhi Companies must comply with RBI and MCA regulations, maintain unencumbered term deposits, follow prescribed deposit and lending limits, and ensure proper filing of financial statements, Income Tax Returns, and half-yearly reports.

At LegalNurture, our team ensures complete assistance throughout the registration journey, from DSC/DIN acquisition and name approval to post-incorporation compliance, annual filings, and RBI adherence, providing an end-to-end, hassle-free experience.

What is a Nidhi Company?

A Nidhi Company is a special type of Non-Banking Financial Company (NBFC) formed to encourage thrift, savings, and mutual benefit among its members. It operates by accepting deposits and providing loans exclusively to its members, creating a self-sustaining community-based financial ecosystem.

The primary purpose of a Nidhi Company is to promote financial discipline and collective prosperity within its member base. Governed by the Companies Act, 2013, and regulated by the Ministry of Corporate Affairs (MCA), Nidhi Companies must operate transparently and maintain financial stability in the interest of their members.

Importance of Nidhi Companies in India

Nidhi Companies play a vital role in promoting financial inclusion, particularly in rural and semi-urban areas, by offering simple, accessible savings and credit services.

Financial Inclusion

Provides accessible financial services to communities underserved by traditional banks.

Affordable Loan Access

Members can obtain personal and business loans at competitive interest rates.

Regulated Framework

Nidhi Companies operate under the oversight of the MCA and must file annual returns (Form NDH-1) and maintain compliance with RBI directives.

Requirements and Structure of a Nidhi Company

Registration Process

  • Obtain Digital Signature Certificates (DSC) and Director Identification Numbers (DIN) for all proposed directors.
  • Draft and file MoA and AoA with the MCA.
  • Apply for name approval under SPICe+ and ensure it adheres to MCA naming guidelines.

Paid-Up Capital

Maintain the minimum paid-up share capital as prescribed by the Central Government at the time of incorporation.

Document Verification

  • Provide valid identity proof (Aadhaar, Passport, or Driver’s License) and address proof (electricity bill, rent agreement, or ownership deed).
  • Furnish proof of registered office address and No Objection Certificate (NOC) from the property owner.

How Does a Nidhi Company Operate?

Membership

Individuals become members by purchasing shares. A Nidhi Company must secure at least 200 members within one year of incorporation.

Deposits

Members deposit their savings, which are pooled and used to fund loans for other members, ensuring liquidity and stability.

Loans and Advances

Loans are offered at interest rates generally lower than those of conventional banks, promoting affordability within the community.

Regulatory Compliance

Nidhi Companies must follow all provisions under the Companies Act and file annual financial returns and statutory reports with the Registrar of Companies.

Profit Sharing

Profits are distributed among members as dividends, proportionate to their deposits and shareholdings.

Governance

Managed by a Board of Directors elected by the members, the board ensures compliance, strategic decision-making, and sustainable growth.

Features of a Nidhi Company

Member-Based Financial Institution

Nidhi Companies function exclusively on a member-based model, where the company’s financial activities are limited to its registered members. Membership Requirement: Only individuals can become members, and each Nidhi Company must have a minimum of 200 members within one year of incorporation. Mutual Benefit Objective: The company’s core purpose is to encourage savings among members and provide loans to them at reasonable interest rates. Self-Sustaining Model: Deposits received from members are utilized for lending within the group, fostering collective financial growth.

Restrictions on Lending and Borrowing

To maintain financial stability and reduce risk, Nidhi Companies must comply with specific lending and borrowing restrictions as per Nidhi Rules, 2014 and MCA guidelines. Lending Limits: Nidhi Companies can lend only to their members and are prohibited from providing loans to non-members or engaging in external financial activities. Deposit and Borrowing Rules: Deposits can be accepted only from members, subject to prescribed limits and financial prudence norms. Interest Rates: Both deposit and lending rates must adhere to the guidelines issued by the Ministry of Corporate Affairs (MCA) to ensure fairness, transparency, and member protection.

Governance by Members

Nidhi Companies follow a democratic governance model, ensuring that operations and decision-making align with the collective interests of members. Board of Directors: Managed by a board elected from among the members, responsible for strategic decisions, compliance, and financial oversight. Annual General Meetings (AGMs): Conducted regularly to discuss company performance, review financial statements, and elect directors. Member Participation: Members actively contribute to key decisions and influence the company’s policies, ensuring accountability and inclusivity.

Eligibility Criteria for Nidhi Company Registration

Minimum Shareholders Requirement

  • A Nidhi Company must have at least seven members at the time of incorporation. Within one year of registration, the company must increase its membership to a minimum of 200 members to maintain compliance.
  • Only individuals can become members of a Nidhi Company. Corporate bodies, trusts, and other organizations are not permitted to be members.

Minimum Directors Requirement

  • The company must have a minimum of three directors. All directors must be natural persons, and at least one director must be a resident of India, meaning they have stayed in India for at least 182 days during the financial year.
  • Each director must obtain a valid DIN from the Ministry of Corporate Affairs (MCA), which is mandatory for incorporation and ongoing compliance.

Capital Requirements

There is no prescribed minimum paid-up capital under the Nidhi Rules, 2014. However, it is advisable to maintain sufficient initial capital to ensure smooth operations and financial stability. The company’s capital base should be adequate to support activities such as accepting deposits and providing secured loans to its members.

Net-Owned Funds Criteria

A Nidhi Company must maintain the minimum net-owned fund ratio as prescribed by the Ministry of Corporate Affairs (MCA). The NOF represents the company’s total owned funds excluding member deposits and reflects its financial health. Compliance with the net-owned funds ratio is mandatory to ensure the company’s solvency, operational capacity, and regulatory approval for continued functioning.

Document Requirements for Nidhi Company Registration

  • Digital Signature Certificate (DSC): For all proposed directors to sign incorporation documents electronically.
  • Director Identification Number (DIN): Mandatory for each director.
  • Memorandum of Association (MoA): Outlines the company’s objectives and operational scope.
  • Articles of Association (AoA): Defines the internal management structure and operational rules.
  • Proof of Identity and Address: Aadhaar Card, Passport, Voter ID, or Driver’s License for all directors and members.
  • Registered Office Address Proof: Lease deed, utility bill, or ownership document for the company’s registered address.
  • No Objection Certificate (NOC): Required if the registered office is not owned by the company or its directors.
  • Affidavits and Declarations: Legal declarations from directors and shareholders confirming compliance with all statutory requirements.

Step-by-Step Nidhi Company Registration Process

Fully managed by our experts — from start to finish

1
Step 1
Obtain a Digital Signature Certificate (DSC)
A Digital Signature Certificate (DSC) is an electronic signature used to authenticate online documents submitted to government portals. Choose a Licensed DSC Provider: LegalNurture assists in obtaining a valid DSC through licensed authorities. Submit Documents: Provide identity and address proof (such as Aadhaar card, PAN, or passport). Verification: The provider verifies your details and issues the DSC. Usage: The DSC is essential for electronically signing forms and documents during the company incorporation process.
2
Step 2
Obtain a Director Identification Number (DIN)
A Director Identification Number (DIN) is a unique number assigned by the Ministry of Corporate Affairs (MCA) to individuals intending to serve as company directors. Application: Apply for DIN via the MCA portal or through the SPICe+ incorporation form. Documentation: Submit proof of identity (PAN card) and address. Verification: The MCA verifies the information and issues the DIN upon approval.
3
Step 3
Name Approval Process
Before incorporation, the proposed name of the Nidhi Company must be approved by the Registrar of Companies (RoC). Name Reservation: Submit a name reservation request through the MCA portal using Part A of SPICe+. Naming Guidelines: The company name must include “Nidhi Limited” and comply with MCA naming regulations. Approval: The RoC reviews and approves the name if it is unique and meets all legal requirements.
4
Step 4
Filing the Incorporation Form (SPICe+)
SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) is an integrated online form that facilitates company incorporation, name reservation, and the issuance of PAN and TAN. Complete the Form: Enter details such as company name, director information, and registered office address. Attach Documents: Upload the required documents—DSC, DIN, proof of registered office, MoA, and AoA. Submit Form: File the SPICe+ form electronically through the MCA portal for verification.
5
Step 5
Drafting and Filing the Memorandum of Association (MoA) and Articles of Association (AoA)
The MoA and AoA are foundational documents defining the company’s objectives, powers, and internal governance structure. Drafting: LegalNurture’s experts draft MoA and AoA in compliance with the Companies Act, 2013 and Nidhi Rules, 2014. Review: Documents are reviewed for legal accuracy and adherence to statutory requirements. Submission: MoA and AoA are filed along with the SPICe+ incorporation form.
6
Step 6
Issuance of Certificate of Incorporation
The Certificate of Incorporation (COI) is the final document issued by the Registrar of Companies, legally recognizing the Nidhi Company’s formation. Verification: The RoC reviews the SPICe+ form, MoA, AoA, and other documents for accuracy and compliance. Issuance: Upon approval, the RoC issues the Certificate of Incorporation, along with the Company Identification Number (CIN). Accessing the Certificate: The COI can be downloaded directly from the MCA portal and serves as official proof of company registration.

Post-Registration Compliance for Nidhi Companies

PAN and TAN Application

Permanent Account Number (PAN)
The PAN is essential for all tax-related activities and financial transactions conducted by the company. Apply for a PAN through the Income Tax Department’s online portal or via authorized intermediaries. The application must include the company’s Certificate of Incorporation, registered address, and director details.

Tax Deduction and Collection Account Number (TAN)
TAN is required for deducting and collecting taxes at source (TDS) as per income tax regulations. Apply online through the Income Tax Department portal, providing the company’s PAN, address, and incorporation details.

Opening a Corporate Bank Account

A corporate bank account is mandatory for conducting all financial transactions, including member deposits, loan disbursements, and operational expenses.

  • Select a Bank: Choose a bank authorized to open accounts for registered companies.
  • Submit Documents: Provide the Certificate of Incorporation, PAN and TAN, MoA and AoA, registered office proof, and board resolution authorizing signatories.
  • Account Activation: Once verified, the account will be activated for official business operations.

Compliance with Nidhi Rules, 2014

Operational Guidelines: Nidhi Companies can accept deposits and provide loans only to their members. The deposit and lending activities must adhere strictly to MCA-prescribed limits. Interest rates on deposits and loans must comply with the limits prescribed under the Nidhi Rules, 2014, ensuring fairness and stability.

Member Management: Achieve and maintain a minimum of 200 members within one year of incorporation. Adhere to statutory requirements regarding share distribution and member participation in the company’s equity.

Annual Returns and Financial Statement Filing

Annual Returns: File the annual return (Form MGT-7) containing details of directors, shareholders, and any structural changes within the company.

Financial Statements: Prepare audited financial statements, including the Balance Sheet, Profit and Loss Account, and Auditor’s Report, and file them annually with the RoC in compliance with applicable accounting standards.

Member Growth and Net-Owned Funds Maintenance

Member Growth: Continuously increase the membership base to promote collective savings and sustain financial viability. Conduct awareness campaigns, maintain transparency in financial dealings, and strengthen trust within the community to attract new members.

Net-Owned Funds (NOF): Maintain the minimum net-owned funds ratio prescribed by the Ministry of Corporate Affairs (MCA) to ensure the company’s financial health. Regularly evaluate the company’s NOF and ensure adequate reserves to meet operational and liquidity requirements.

Financial Regulations for Nidhi Companies

Accepting Deposits and Deposit Schemes

Deposit Acceptance:

  • Member-Only Deposits: Nidhi Companies are permitted to accept deposits only from their members. Accepting deposits from non-members is strictly prohibited under the Nidhi Rules.
  • Regulatory Limits: The total deposits accepted must not exceed the limits prescribed under the Nidhi Rules, 2014. Companies are required to maintain a prudent deposit-to-loan ratio to ensure liquidity and financial stability.

Deposit Schemes:

  • Types of Schemes: Nidhi Companies typically offer Fixed Deposits (FDs), Recurring Deposits (RDs), and Savings Deposits, each governed by specific regulatory norms related to tenure, interest rate, and renewal terms.
  • Disclosure Requirements: All deposit schemes must include clear disclosures about the terms and conditions—including interest rates, maturity period, withdrawal rules, and penalties—ensuring complete transparency for members.

Borrowing and Lending Restrictions

Lending Restrictions:

  • Member-Only Loans: Loans can be extended only to members of the company. Lending to outsiders or non-members is strictly prohibited.
  • Secured Lending: Loans must be secured by adequate collateral as prescribed by law. Acceptable securities typically include gold, property, or deposits held within the Nidhi Company.

Borrowing Restrictions:

  • Prohibition on External Borrowings: Nidhi Companies are not allowed to borrow funds from external sources such as banks, financial institutions, or the general public. They operate solely on member-based funding.
  • Regulatory Compliance: All borrowing activities must comply with the limits and provisions of the Nidhi Rules, 2014, ensuring responsible fund management and financial sustainability.

Interest Rates and Loan Policies

Interest Rates:

  • Deposit Interest Rates: Interest rates on member deposits must remain within the limits prescribed by the Ministry of Corporate Affairs (MCA). These rates should be fair, competitive, and clearly communicated to members.
  • Loan Interest Rates: The interest charged on loans must also comply with the prescribed regulatory limits and should be transparent and non-exploitative. Loan terms must be documented and approved by the company’s board.

Loan Policies:

  • Terms and Conditions: Every Nidhi Company must define clear loan policies, covering repayment schedules, interest computation, collateral requirements, and default penalties.
  • Transparency: All loan terms should be communicated clearly to members before disbursement, ensuring informed consent and avoiding disputes.

Auditing and Accounting Standards Compliance

Auditing Standards:

  • Regular Audits: Nidhi Companies are required to undergo statutory audits by a qualified Chartered Accountant at least once a year. The audit ensures that the company’s financial activities adhere to legal and accounting standards.
  • Audit Reports: The auditor’s report must be submitted to the Registrar of Companies (RoC) along with the company’s annual returns and financial statements.

Accounting Standards:

  • Regulatory Compliance: Nidhi Companies must maintain proper books of accounts and adhere to the Accounting Standards prescribed under the Companies Act, 2013.
  • Financial Statements: Each year, the company must prepare and file a Balance Sheet, Profit & Loss Account, and Cash Flow Statement, ensuring accuracy, consistency, and compliance with statutory guidelines.

Why Choose LegalNurture for Nidhi Company Registration?

Choosing LegalNurture for your Nidhi Company registration ensures a smooth, transparent, and efficient incorporation process guided by experienced professionals. Our team provides personalised legal assistance at every stage—from document preparation and compliance verification to final approval from the Ministry of Corporate Affairs (MCA).

With LegalNurture, you benefit from:

End-to-End Assistance

Comprehensive support through every step of the registration process.

Expert Guidance

Qualified professionals ensuring adherence to all statutory and regulatory requirements.

Fast and Reliable Processing

Streamlined documentation and timely filings for quick incorporation.

Transparent Pricing

No hidden costs, with complete clarity on government and professional fees.

Ongoing Compliance Support

Continued assistance with post-registration filings and annual reporting.

Our user-friendly process and dedicated advisory team make it simple to establish your Nidhi Company while maintaining complete legal compliance.

Ready to Start Your Nidhi Company Registration?

Our user-friendly process and dedicated advisory team make it simple to establish your Nidhi Company while maintaining complete legal compliance.