Here is the brief analysis on the functioning of the Nidhi Company.

2. NIDHI COMPANY
All you want to know is here…

3. WHAT IS NIDHI COMPANY
• Nidhi Company is governed by Section 406 of the
Companies Act, 2013 and Company Nidhi Rules, 2014.
The company is incorporated as a public company.
• As per Section 406, “Nidhi” means 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 to, its
members only, for their mutual benefit.

4. INCORPORATION OF NIDHI COMPANY
• The company is incorporated as a public company with following requirements:
• Minimum paid up capital of Rs. 5,00,000, 3 directors and 7 members
• No preference shares shall be issued.
• Every Company incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’
as part of its name.
• A Nidhi company can be incorporated via SPICe (members equal to 7) or through INC-7.
SPICe Route INC-7
• Take name approval in INC-1. Take name approval in INC-1.
• File eform INC-32 (SPICe) with eMOA and File eform INC-7(incorporation) along with
eAOA. (Name can be applied in INC-32 also). DIR-12(director app.) and INC-22 (address)
• Submit Application for PAN and TAN. Get Certificate of Incorporation.

5. MEMBERSHIP
• A Nidhi shall not admit a body corporate or trust as a member.
• A minor shall not be admitted as a member of Nidhi: (Provided that deposits may be
accepted in the name of a minor, if they are made by the natural or legal guardian
who is a member of Nidhi.)
OBJECT OF NIDHI COMPANY
To receive, accept or collect Savings or Deposit money from its members of all categories as deposit i.e.
Saving Deposit account , Fixed Deposit (F.D), Recurring Deposit (R.D), Monthly Income Scheme (
MIS),Term Deposit (T.D), Saving account, under various savings schemes will be formulation from time to
time by the company will provide as such Interest or benefit on the Deposit whatever is fit for and
beneficial to the company and to the members as per the rules & regulation or guideline of Reserve
Bank of India(RBI), Ministry of Corporate Affairs and Regulatory Authority on NBFC or NIDHI.
To lend, grant loans to the members or shareholders only as against securities of immovable properties and
or on the security of deposits, movables such as gold, silver, jewellery, Kisan Vikas Patra, National saving
Certificates, Life Insurance Policy and to provide all kinds of micro finance services on behalf of personal
credit and member as a guarantor, as may from time to time prescribed in law for Mutual Benefit / Nidhi
Companies.

6. POST INCORPORATION REQUIREMENTS
Every Nidhi shall, within a period of one year from the commencement of these rules,
ensure that it has :
• Minimum number of members should be 200 and ensure the membership is not reduced
below 200 at any time.
• Net owned funds shall be Rs.10,00,000/- or more
• Ratio of net owned funds to deposit shall be not more than 1:20.
• Unencumbered term deposits of not less than 10% of the outstanding deposits as per
Rule 14.
• A Nidhi Company shall not admit a body corporate or trust as a member. A minor shall
not be admitted as a member of Nidhi Company.

7. GENERAL RESTRICTIONS ON NIDHI COMPANY
No nidhi shall carry on :
• the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities by any body
corporate.
• Issue preference shares, debentures, or any debt instrument by any name or in any form whatsoever.
• Open any current account with member.
• Acquire another company by purchase of securities or Control the composition of the Board of Directors of any other
company in any manner whatsoever.
• Carry on any business other than the business of borrowing or lending in its own name;
• Accept Deposits from or lend to any person, other than its members;
• Pledge any of the assets lodged by its members as security;
• Take Deposits from or lend money to anybody corporate;
• Enter into any Partnership Arrangement in its borrowing or lending activities;
• Issue or cause to be issued any advertisement in any form for soliciting deposit;
• Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or the granting loans
• 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 Nidhi.

8. DEPOSITS
• The fixed deposits shall be accepted for a minimum period of six months and a
maximum period of sixty months.
• Recurring deposits shall be accepted for a minimum period of twelve months and a
maximum period of sixty months.
• The maximum balance in a savings deposit account at any given time qualifying for
interest shall not exceed one lakh rupees at any point of time and the rate of interest
shall not exceed two per cent above the rate of interest payable on savings bank
account by nationalized banks.
• A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding
the maximum rate of interest prescribed by the Reserve Bank of India which the
Non-Banking Financial Companies can pay on their public deposits.

9. ACCEPTANCE OF DEPOSITS
• The fixed deposits shall be accepted for a minimum period of six months and a
maximum period of sixty months.
• Recurring deposits shall be accepted for a minimum period of twelve months and a
maximum period of sixty months.
• The maximum balance in a savings deposit account at any given time qualifying for
interest shall not exceed one lakh rupees at any point of time and the rate of interest
shall not exceed two per cent above the rate of interest payable on savings bank
account by nationalized banks.
• A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding
the maximum rate of interest prescribed by the Reserve Bank of India which the
Non-Banking Financial Companies can pay on their public deposits.

10. LOANS
A Nidhi shall provide loans only to its members. The loans given to a member shall be
subject to the following limits:
• Rs.2,00,000/- where the total amount of deposits from members is less than Rs.2 crores;
• Rs.7,50,000/- where the total amount of deposits from its members more than Rs.2 crores
but less than Rs.20 crores;
• Rs.12,00,000/- where the total amount of deposits from its members is more than Rs.25
crores but less than Rs.50 crores;
• Rs.15,00,000/- where the total amount of deposits from its members is more than Rs.50
crores.
A Nidhi shall give loans to its members only against the following securities, namely gold,
silver and jewellery immovable property fixed deposit receipts, National Savings
Certificates, other Government Securities and insurance policies.

11. Share Capital
• Every Nidhi shall issue equity shares of
the nominal value of not less than Rs.10/-
each.
• No service charge shall be levied for issue
of shares.
• Every Nidhi shall allot to each deposit
holder at least a minimum of 10 equity
shares or shares equivalent to Rs.100/-.
• A savings account holder and a recurring
deposit account holder shall at least 10
equity shares of Rs.10
Directors
• The Director shall be a member of Nidhi.
• The Director of a Nidhi shall hold office
for a term up to ten consecutive years on
the Board of Nidhi.
• The Director shall be eligible for re-
appointment only after the expiration of
two years of ceasing to be a Director.

12. BRANCHES
• A Nidhi may open branches, only if it has earned net profits after tax continuously
during the preceding three financial years. Nidhi may open up to three branches
within the district.
• No Nidhi shall open branches or collection centres or offices or deposit centres, or by
whatever name called outside the State where its registered office is situated.
• A Nidhi shall not close any branch unless it :-
• Publishes an advertisement in a newspaper in vernacular language in the place
where it carries on business at least thirty days prior to such closure, informing the
public about such closure;
• Gives an intimation to the Registrar within thirty days of such closure.

13. AUDITOR
• No Nidhi Company shall appoint or re-appoint an individual as auditor for more
than one term of five consecutive years.
• No Nidhi Company shall appoint or re-appoint an audit firm as auditor for more
than two terms of five consecutive years;
• Provided that an auditor (whether an individual or an audit firm) shall be eligible
for subsequent appointment after the expiration of two years from the completion of
his or its term.

14. DIVIDEND
A Nidhi Company shall not declare dividend exceeding twenty five per cent. or such
higher amount as may be specifically approved by the Regional Director for reasons to
be recorded in writing and further subject to the following conditions, namely:-
• an equal amount is transferred to General Reserve
• there has been no default in repayment of matured deposits and interest and
• it has complied with all the rules as applicable to Nidhi's.
Note: RBI has exempted the notified Nidhi's from the core provisions of the RBI Act and
other directions applicable to NBFCs. As on date RBI does not have any specified
regulatory framework for Nidhi’s. The provisions of Section 45-IA(Compulsory Registration
with RBI), Section 45-IB(Maintenance of Liquid Assets), Section 45-IC(Creation of Reserve
fund) have been exempted for Nidhi Companies.

15. FORM-NDH-1
• Rule 5(2) of Nidhi Rules, 2014 states that within ninety days from the close of the
first financial year after its incorporation and where applicable, the second financial
year, Nidhi shall file a return of statutory compliances in Form-NDH-1 along with
such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 with
the Registrar duly certified by a company secretary in practice or a
chartered accountant in practice or a cost accountant in practice.
• This form is filed as an attachment to general form GNL-2.

16. Enter the basic details of the Nidhi
Company mentioned in the form.
Enter the number of the subscribers
and members as asked.

17. Enter the number of members at the
end of the first financial year.
If the condition of point 4 is not
satisfied, then the SRN of Form -
NDH-2 is required to be mentioned
Enter the details of paid up share
capital, free reserves and losses.

18. Enter the details of deposits in banks,
and post office.
Verification by the Board of Directors

19. Affix the DSC of the Director and the practicing
professional and mention their credentials.
Attach the pdf of the form in GNL-2.

20. FORM NDH-2
• Rule 5(3) of Nidhi Rules, 2014 states that, if a Nidhi within a period of one year
from the commencement of these rules have less than 200 members or the ratio of
Net Owned Funds to deposits is more than 1: 20, it shall within thirty days from the
close of the first financial year, apply to the Regional Director in Form NDH-2 along
with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for
extension of time and the Regional Director may consider the application and pass
orders within thirty days of receipt of the application.
• A specimen of the same is here for your ready reference.

21. Enter the CIN of the company
and prefill the same.
Check mark for which you want
an extension.
5(1)(a) : not less than two
hundred members
5(1)(d) : ratio of Net Owned
Funds to deposits of not more
than 1:20

22. Enter the number of members
and ratio of net owned funds to
deposits.

23. Attach the mandatory items
and any other if required.
Write the details of Director
who is signing the form.

24. Write the details of Practicing
professional who is signing the
form.
Click on Check form, affix DSC
and Prescrutiny the form.

25. FORM- NDH-3
• Rule 21 of Nidhi Rules, 2014 states that every nidhi company shall file half yearly
return with the Registrar in Form NDH-3 along with such fee as provided in
Companies (Registration Offices and Fees) Rules, 2014 within thirty days from the
conclusion of each half year duly certified by a company secretary in practice or
chartered accountant in practice or cost accountant in practice.
• The form has to be attached as an attachment in Form GNL-2.

26. Write the details of the Nidhi
Company and branches, if any.

27. Write the details of the members
at the beginning, during and at
the end of the year.
Enter the details of deposits.

28. Enter the details of litigation, if
any.
Enter the details of loans.

29. Enter the financial summary of
the company.

30. Verification by the Board of
Directors and affix the DSC of
Director

31. Affix the DSC of the practicing professional and
mention the credentials.
Attach the pdf of the form in GNL-2.

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