Nidhi Company Registration

Under Rule 5 of the Nidhi Rules 2014, a Nidhi company must, within one year of incorporation: have at least 200 members; have Net Owned Funds of ₹20 lakh or more (increased from ₹10 lakh by the Nidhi (Amendment) Rules 2022); maintain an unencumbered term deposit of not less than 10% of outstanding deposits as required by Rule 14; and ensure the ratio of Net Owned Funds to deposits does not exceed 1:20. If a Nidhi fails to meet these criteria within 12 months, it must apply to the Regional Director (MCA) in Form NDH-2 for an extension of up to one year. Failure to meet the criteria even after extension, or failure to file NDH-2 within 30 days of the end of the first year, makes the company and every officer in default liable to a penalty of ₹10,000 under the Nidhi Rules 2014 as amended.

Rule 6 of the Nidhi Rules 2014 lists activities that a Nidhi company is expressly prohibited from carrying out: it cannot carry on the business of chit funds, hire purchase finance, leasing finance, insurance, or acquisition of securities issued by any body corporate. It cannot issue preference shares or debentures, or offer any other securities by any name. It cannot open any current account with its members (only savings, recurring, and fixed deposit accounts are permitted). It cannot acquire another company by purchase of securities or control its management, and it cannot pay any brokerage or incentive for mobilising deposits or for granting loans. Violations of Rule 6 attract prosecution under Section 406 of the Companies Act 2013 read with Section 450, which provides for a fine of ₹10,000 and continuing default fines of ₹1,000 per day.

A Nidhi company is incorporated as a public limited company under Section 406 of the Companies Act 2013 — unlike a private limited company, it requires a minimum of seven members and three directors at incorporation per Section 3(1)(a) and Section 149. The Memorandum of Association must have 'Nidhi' in the company name and must state that the main object is cultivating the habit of thrift and savings among its members and receiving deposits from, and lending to, members only, for their mutual benefit. After incorporation, the company must file Form NDH-1 (return of statutory compliances) with the Registrar of Companies within 90 days from the close of the first financial year, confirming compliance with the 200-member and NOF thresholds under Rule 5 of the Nidhi Rules 2014. The company cannot declare a dividend exceeding 25% per annum as per Rule 18 of the Nidhi Rules 2014.

Nidhi companies are specifically exempted from the Reserve Bank of India Act 1934 provisions relating to Non-Banking Financial Companies — the RBI issued a notification dated August 20, 1997 exempting Nidhis from Sections 45-IA, 45-IB, and 45-IC of the RBI Act, subject to the condition that they deal only with their members. However, the deposit ceiling rules under Rule 10 of the Nidhi Rules 2014 still apply: the aggregate of deposits cannot exceed 20 times the Net Owned Funds as per the last audited balance sheet. Interest on deposits is capped: fixed deposits may carry interest not exceeding 2% above the highest rate offered by nationalised banks for the same tenure under Rule 11(b). Repayment of deposits is governed by Rule 12, which mandates that no loan can be given against deposits within three months of making the deposit.

Yes — in addition to the standard annual filings under the Companies Act 2013 (Form AOC-4 for financial statements, Form MGT-7 for annual return), a Nidhi company must file Form NDH-1 within 90 days of the close of each financial year under Rule 21 of the Nidhi Rules 2014, certifying compliance with all Nidhi Rules including membership count, NOF, deposit ratio, and unencumbered term deposit. If the Nidhi has applied for extension of time under Rule 5(3) using Form NDH-2, a compliance report must be filed along with the next NDH-1. Additionally, any branch opening requires prior approval from the Regional Director using Form NDH-3, and branches can be opened only within the same district after five years of profitable operations under Rule 22 of the Nidhi Rules 2014. Non-filing of NDH-1 attracts a penalty of ₹10,000 and a further penalty of ₹500 per day of continuing default under the Nidhi Rules 2014.