“Nidhi” means a company which has been incorporated as a Nidhi. Object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with such rules as are prescribed by the Central Government.

Nidhi Rules, 2014

 Nidhi (Amendment) Rules, 2022 w.e.f. 19/04/ 2022

How To Incorporate Nidhi Co.

  • These Rules applies on Nidhi or Mutual Benefit society incorporated under section 406/Section 620A of the Companies act 2013/1956 respectively.
  • A Nidhi Co. shall be a public company and shall have a minimum paid up equity share capital of Rs. 10 lakhs with effect from 19/04/2022 earlier it is required 5 Lakhs. (Rule 4)

However, For Existing Nidhi Company (at the time of amendment), shall comply this rule within 18 months of such date.

  • New* Nidhi Co. shall not issue preference shares. (Rule 4)

For Existing Nidhi co. issued Preference shares shall be redeemed in accordance with the terms of issue of such shares.

*New Nidhi co. states incorporated after 19/04/2022.

Nidhi co. should not have any object in its Memorandum of Association other than the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.

  • Every “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.

Requirements for minimum number of members, net owned fund etc. (Applies on Only Nidhi Incorporate before 19/04/2022) (Rule 5)

Every Nidhi shall, within a period of 1 year from the date of its incorporation, ensure that it has—

(a) 200 or more members

(b) Net Owned Funds (Paid up Equity Share Capital + Free reserve – Acc. Losses – Intangible Asset) of Rs. 10 Lakhs or more

(c) Unencumbered term deposits of not less than 10% of the outstanding deposits as specified in rule 14; and

(d) ratio of Net Owned Funds to deposits of not more than 1:20.

Note: In case of non-compliance with (a) 200 members or more (d) NOF to Deposit 1:20 ratio above, then Nidhi shall within 30 days of close of 1st FY Apply to Regional Director (RD) in Form NDH -2 + Prescribed fees for extension of time up to 1 year, and RD may consider such application and pass extension order within 30 days of application.

Note: If the failure to comply (a) to (d) above, beyond the second financial year, Nidhi shall not accept any further deposits from beginning of the second financial year till it complies with the provisions contained in above and, besides being liable for penal consequences as provided in the Act.

Other Filling Compliance: FORM NDH – 1 (Return of Statutory Compliance)

  • To be Filed Within 90 days from close of first FY after incorporation or where applicable, 2nd FY,
  • Nidhi shall file return of stat. compliances in Form NDH -1 + Fees to the RoCDuly certified by CA/CS/CMA in practice.

Requirements for minimum number of members, net owned fund etc. (Applies on Only Nidhi Incorporate After 19/04/2022) (Rule 3B)

Nidhi shall apply, in Form NDH-4, within a period of 120 days of its incorporation for declaration as Nidhi, if it fulfils the following conditions, namely:-

  • 200 or more members; and
  • Net Owned Funds of Rs 20 Lakhs rupees or more.

The company shall also attach, with Form NDH-4, a declaration of fit and proper person criteria, by all the promoters and directors of the company. (Criteria given in Last under Rule-3B(3))

Further Central govt. (CG) examine the application filed in Form NDH-4 and convey its decision within a period of 45 days to the company if not taken decision in 45 days than deemed as approve.

When any promoter or director is a „fit and proper person‟, (Rule 3B (3))

The following shall be taken into account: –

  1. Integrity, honesty, ethical behavior, reputation, fairness and character of the person; and
  2. The person not incurring any of the following disqualifications:-
  • Criminal complaint & Sec 154 of Code of criminal procedure, 1973
  • Charge sheet has been filed
  • Order of restraint, prohibition or debarment has been passed order of restraint, prohibition or debarment has been passed
  • An order of conviction has been passed involving moral turpitude
  • Declared insolvent and not been discharged
  • Found to be of unsound mind by a court
  • Willful defaulter
  • Declared a fugitive economic offender
  • Director in 5 or more companies incorporated or declared as Nidhi, or is a promoter of 3 or more companies incorporated or declared as Nidhi.

Note:  Provided that the decision of the Central Government approving the application, shall be filed by the company with the Registrar along with Form 20A required under section 10A* of the Act (*Commencement of business).Provided further that such company shall commence its business only once the decision of the Central Government approving its application is obtained from the Central Government pursuant to the declaration given under rule 12 of the Companies (Incorporation) Rules, 2014.

  • In case a company does not comply with the requirements of NDH 4, it shall not be allowed to file Form No. SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3(Return of allotment).


  • Carry on business of:
    • Chit fund,
    • hire purchase Finance,
    • leasing Finance,
    • Insurance or
    • Acquisition of securities issued by anybody corporates.
  • Issue preference shares, debentures or other debt Instruments.
  • Opening current account with members.
  • Acquire or purchase sec. of any other co. or control composition of BoD of any other co. in any manner whatsoever or enter into any arrangement for change of its mgt. (not even with SR or approval of RD)
  • Carry on any Business other than of borrowing or lending in its own name.
Note: Nidhi which has adhered to all prov. of these rules may provide locker facilities on rent to its members subject to Rental income from such facilities not more than 20% of gross income (not net profit) at any point of time during a FY.
  • Accept Deposits from/lending to any person other than members.
  • Take Deposits from or lend money to body corporate.
  • Pledge any of the assets lodged by its members as security.
  • Enter into any partnership arrangement in its borrowing or lending activities.
  •  Issue any advertisement to solicit deposit i.e. Private circulation of Fixed Deposit scheme amongst members carrying words “For Private circulation to members only” not considered as advertise]
  • Pay brokerage/incentives for mobilizing deposit.
  • Raise loans from banks or FIs or any other source for the purpose of advancing loans to members.

Provisions w.r.t. Issuance of Share Capital & It’s Allotment (Rule 7)

  • Nidhi shall issue fully paid up equity shares of NV not less than Rs. 10 each
  • No service charge levied on issue of shares
  • Nidhi to allot each deposit holder lower of:
    • At least 10 shares or
    • Shares equivalent to Rs. 100
  • Savings A/C holder and recurring deposit A/C holder to hold at least 1 share of Rs. 10 each.

Eligibility to Become member of Nidhi Co. (Rule 8)

  • Body Corporate or trust – cannot be members
  • Not reduced below 200 at any time
  • No minor shall be member.
    • Proviso – Deposit may be accepted in name of minor if made by legal guardian who is a member of Nidhi
  • A member shall not transfer more than 50% of his shareholding as on date of availing of loan or making of deposit during subsistence of such loan or deposit, as the case may be. Provided that member shall retain min. no. of shares as per Rule 7 at all times

Branches of Nidhi (Rule 10)

  • Nidhi may open branches, only if it has earned net PAT continuously during preceding 3 FYs.
  • If a Nidhi proposes to open more than 3 branches within a district or any branch outside the district, it shall:
    • Obtain prior permission of RD and
    • Intimate to ROC about opening of every branch within 30 days of such opening.

Note: 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.

Note: No Nidhi shall open branches or collection centres or offices or deposit centres, or by whatever name called unless financial statement and annual return (up to date) are filed with the Registrar.

Rule-10 amended (omitted) w.e.f. 19-April-2022 by the Nidhi (Amendment) Rules, 2022.

How Can Nidhi Close Any Branch (Rule 10(6))

A Nidhi shall not close any branch, unless –

  • The proposal to close the branch along with the plan
    • How the existing deposits be paid off and
    • How the existing loan shall be recovered, is duly approved by the Board at its meeting; and
  • It has obtained
    • Prior approval of the Regional Director by applying in Form NDH-2 along with fee
    • At least 60 days prior to such closure.
  • After obtaining approval
    • Publish advertisement in (NDH-5) “Local News Paper” at least thirty days prior to closure.
    • Affixes a copy of such advertisement on Notice Board of Nidhi/Branch at least 30 days.
    • intimation to the Registrar within a period of 30 days of such closure in Form NDH-2 along with fee.

Acceptance of deposits by Nidhi (Rule 11)

  • Nidhi shall not accept deposits more than 20 times of its Net Owned Funds as per last audited Financial Statement.

Particulars Required For Placing a Deposit Application (Rule 12)

Every application form shall contain following particulars, namely: —

(a) Name of Nidhi.

(b) Date of incorporation of Nidhi.

(ba) The date of declaration or notification as Nidhi.

(c) The business carried on by Nidhi with details of branches, if any.

(d) Brief particulars of the management of Nidhi (name, addresses and occupation of the directors, including DIN).

(e) Net profits of Nidhi before and after making provision for tax for the preceding three financial years.

(f) Dividend declared by Nidhi during the preceding three financial years.

(g) Mode of repayment of the deposit.

(h) Maturity period of the deposit.

(i) Interest payable on the deposit.

(j) The rate of interest payable to the depositor in case the depositor withdraws the deposit prematurely.

(k) The terms and conditions subject to which the deposit may be accepted or renewed.

(l) A summary of the financials of the company as per the latest two audited financial statements as given below:

(i) Net Owned Funds 
(ii) Deposits accepted 
(iii) Deposits repaid 
(iv) Deposits claimed but remaining unpaid 
(v) Loans disbursed against—

         (a) immovable property; (b) deposits; and (c) gold, silver and jewellery
(vi) Profit before tax 

(vii) Provision for tax 

(viii) Profit after tax 

(ix) Dividend per share

Note: Some Other fields also required to be incorporated for more details leave your number in comment section.

Nidhi Required Documentary Evidence of Depositors in Database

(a) Proof of Identity

(b) Proof of address

This proof shall be govt issued documents such as driving license, Adhar card, Ration card etc.


  • Fixed Deposits: Minimum 6 months and Maximum 60 months
  • Recurring Deposits – Minimum 12months and Max 60months
  • Maximum interest rate on Fixed Deposit & Recurring Deposit equal to Maximum rate prescribed by RBI that NBFCs can pay on their public deposit
  • In case of Recurring Deposits relating to mortgage loans, maximum period of deposit equal to Repayment period of such loan
  • Maximum balance in savings A/C qualifying for interest equal to Rs. 1 lakh and Interest Rate not more than = Interest on such account by nationalized bank + 2%
  • Foreclosure of FD/RD account:
    • Nidhi shall not repay any deposit within 3months of its acceptance

o On request of depositor, if Nidhi agrees to repay after 3 months, no interest upto 6months from deposit

  • On request, if Nidhi agrees to repay before expiry, Rate of interest shall be reduced by 2% from rate which Nidhi would have ordinarily paid for the period for which deposit run.

Note: In case of death of depositor, repay with interest at rate which Nidhi would have ordinarily paid for the period for which deposit had run.

LOAN RULES (Rule 15)

To members subject to following limits:

Where total amt. of deposit from all its membersLoan to each member
Less than Rs. 2 croresRs. 2 lakhs
 More than Rs. 2 – 20 croresRs. 7.5 lakhs
More than Rs. 20 – 50 croresRs. 12 lakhs
More than 50 croresRs. 15 lakhs
·       Where Nidhi has no profit in any of last 3 FY, above limit to be reduced to 50%.
  • If any member has defaulted in payment of loan – He shall not be eligible for further loan
  • Loan can be given to members only against following security:
    • Gold, Silver or Jewelry provided repayment period does not exceed 1 year
    • Immovable property,
    • However, Repayment in less than or equal to 7 year/Loan value less than or equal to 50 % of such immovable property

Un-encumbered term deposit (Rule 14)

  • Every Nidhi shall invest and continue to keep invested:
    • In unencumbered Term Deposit with
      • Sch. Commercial bank (except co-op bank or Regional Rural Bank
      • Post office
    • Amount greater than or equal to 10% of deposit outstanding at the close of business on the Last Working Day of 2nd preceding month.
  • Regional Director given exceptional temporary withdrawal subject to prior approval ensuring restoration of amount. Application to be made in Form NDH-2 along with prescribed fees.

Rate of Interest (Rule16)

  • Rate of Interest on loan by Nidhi: Not grater (Highest Rate of Interest offered on deposit by Nidhi + 7.5%) on Reducing Balance Method
  • However, Nidhi Co. shall charge same Rate of Interest on borrowers i.e. same class of loans and Rate of Interest of all classes shall be prominently displayed on the notice board at the Registered Office and each branch office.

Rules Relating To Directors (Rule 17)

  • The Director shall be a member of Nidhi Co.
  • Director of a Nidhi shall hold office for a term up to 10 consecutive years on the Board of Nidhi.
  • Director shall be eligible for re-appointment only after the expiration of 2 years of ceasing to be a Director.
  • Extension by Central Govt. allowed, but it shall terminate on expiry of such extended tenure.
  • Provision of Sec 152(4) [Declaration] and 164 shall apply.

Dividend (Rule 18)

  • A Nidhi shall not declare dividend exceeding 25 % in a financial year.
[Rule-18 newly inserted w.e.f. 19-April-2022 by the Nidhi (Amendment) Rules, 2022.]

Auditor (Rule 19)

  • No Nidhi shall appoint/re-appoint an individual as auditor for more than 1 term of 5 consecutive years.
  • No Nidhi shall appoint/re-appoint an audit firm as auditor for more than 2 term of 5 consecutive years.
  • Can be Reappointment (individual/audit firm) After expiry of 2 years from completion of term.

Prudential norms (Rule 20)

  • Adhere to the prudential norms for revenue recognition and classification of assets in respect of mortgage loans or jewel loans as contained hereunder.
    • Income including interest or any other charges on non-performing assets shall be :
      • Recognised only when it is actually realised and
      • Any such income already recognised before the asset became non-performing and which remains unrealised in a year shall be reversed in the profit and loss account of the immediately succeeding year.
    • mortgage loans, the classification of assets and the provisioning required shall be as under:
SUB STANDARD ASSET10% of the aggregate outstanding amount
DOUBTFUL ASSET25% of the aggregate outstanding amount
LOSS ASSET100% of the aggregate outstanding amount
Provided that a Nidhi may make provision for exceeding the percentage specific herein.

Note: Estimated realisable value of the collateral security to which a Nidhi has valid recourse may be reduced from the aggregate outstanding amount, if the proceedings for the sale of the mortgaged property have been initiated in a court of law within the previous 2 years of the interest, income or instalment remaining unrealised.


(i) The total amount of provisions, if any, to be made on account of income reversal and non-performing assets remaining unrealised;

(ii) The cumulative amount provided (Provisions) till the previous year;

(iii) The amount provided (Provisions) in the current year; and

(iv) the balance amount to be provided (Provisions).

Note: Such disclosure shall continue to be made until the entire amount to be provided has been provided for.

NORMs W.r.t. Gold or Silver or Jewellery

(a) The aggregate amount of loan outstanding against the security of gold or silver or jewellery shall either be recovered or renewed within 3 months from the due date of repayment;

(b) If the loan is not recovered or renewed and the security is not sold within the aforesaid period of 3 months, the company shall make provision in the current year’s financial statements to the extent of unrealised amount or the aggregate outstanding amount of loan including interest as applicable;

(c) No income shall be recognised on such loans outstanding after the expiry of the 3 months period specified in (a) above or sale of gold or silver or jewellery, whichever is earlier; and

(d) The loan to value ratio shall not exceed 80 per cent.


Within 30 days from the conclusion of each half year duly certified by a chartered accountant in practice & CS/CMA in Practice.

Auditor’s certificate (Rule 22)

  • Auditor of the company shall furnish a certificate every year to the effect that the company has complied with all the provisions and such certificate shall be annexed to the audit report
  • Non-compliance, Auditor shall specifically state the rules which have not been complied with.

NOTE: We are not incorporated Rule 3A in this article which is not applicable in new nidhi companies in our opinion, and this is disclaimer that others opinion me different from our, for more clerification refer bare act/rules.

Note: No Nidhi company, which has not complied with the requirements of this rule, or fails to comply with such requirement on or after the commencement of the Nidhi (Amendment) Rules, 2022, or in case the application submitted by the company in Form NDH-4 is or has been rejected by the Central Government, shall raise any deposit from its members or provide any loan to its members under the provisions of these rules from the date of such non-compliance, or from the date of the commencement of the above said rules, or the date of rejection of the application in Form NDH-4, whichever is later.

Note: If any deposit raised by a company after the date of non-compliance, or the date of commencement of the above said rules, or the date of rejection of the application in Form NDH-4, whichever is later as referred Note above shall be deemed to have been raised in pursuance of Chapter V of the Act, and shall be subject to all the requirements under that Chapter, or under any other provisions of the Act or the rules made thereunder, as the case may be. Provided also that nothing in this rule shall apply to companies incorporated as Nidhi on or after the commencement of the above said rules. [Fourth and fifth proviso in Rule-3A newly inserted w.e.f. 19-April-2022 by the Nidhi (Amendment) Rules, 2022.]

Penalty for non-compliance (Rule 24)

  • If a company falling under rule 2 contravenes any of the provisions of the rules prescribed herein,
    • the company and every officer of the company who is in default.
    • shall be punishable with fine which may extend to 5000 rupees, and
    • where the contravention is a continuing one, with a further fine which may extend to 500 rupees for every day after the first during which the contravention continues.

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