Nidhi Company Registration in India - Updated

Before we even start explaining what a Nidhi company is, we need to understand – why it is required in India. India predominantly has always been a Savings economy, where Savings was always given a priority in our daily Economic matters. Savings is a cultural phenomenon in our Country and not just an Economical Phenomena. The Habit is inculcated amongst various members of the Society to Save. Kids have Piggy Banks, and Indian Women are World over known for their Savings and in helping the household during difficult times. India is also known for its co-operative culture, where various members of a Trade / Society / Location / Culture / come together to form a Co-operative society to help each other and to collectively ensure development of each member of the community. Co-operation is not in any way new to India; it has existed since time immemorial and has historical significance in the country. 

Nidhi company was born out of the combination of the culture of Savings and Co-operation in India. In simpler terms – Nidhi Company helps its members save and prosper. The objective of a Nidhi Company in India is to drive its members to Save and inculcate the principle of helping each other through Cooperation, thus Nidhi company also lends money to its own Members when they need money during difficult times. Members in Nidhi Company are mostly tightly knitted and know each other well, the idea of Co-operation and Savings drives the Nidhi Company, and its Objectives. 

Reasons for formation of a Nidhi Company

  1. Co-operation – Drive cooperation within the members of the Company. 
  2. Benefit to Members – Of the People, By the People and for the people, this symbolizes the basic tenet of the Nidhi Company. Remember the money is circulated within the Members and Profits earned are also distributed to members. 
  3. Savings – Encourage the members to Save 
  4. Managed Risks – As the members of the Nidhi Company govern the company themselves, they manage the risks well. Also, there are limitations imposed by the regulatory authorities, to further ensure management of the risks of the Nidhi Companies. 
  5. Compliances – Compared to forming an NBFC, Nidhi companies are easier to form and easier to manage also 
  6. Focus – As Nidhi companies are made for a small group of people belonging to some Homogeneous class, it maintains focus on the activities it undertakes. 

Provisions of the Companies Act, 2013 explained

Section 406 of the Companies Act, 2013 gives the Government at the center, the authority to change how certain rules in the Act apply to companies known as "Nidhis" or "Mutual Benefit Societies."

A "Nidhi" or "Mutual Benefit Society" is a type of company that the Government can officially recognize through an announcement in a special government publication called the Official Gazette. The government can use this announcement to say which parts of the Act won't apply to these Nidhis or Mutual Benefit Societies or how these rules will apply to them, but with some changes and adjustments.

Before making such an announcement, the government has to share a draft of it with both Houses of Parliament while they are in their working sessions for about thirty days. If both Houses of Parliament don't like the announcement or want some changes, it won't be made, or it will be made with the changes that both Houses agreed on. The thirty-day period doesn't include times when the Parliament isn't working for more than four days in a row. Lastly, any announcement made under this section has to be shown to both Houses of Parliament soon after it's made.

Registration of Nidhi Company in India

With the advent of Online systems and Government’s focus on making Indian Compliance and regulatory structure more user friendly – formation of a Nidhi Company has been made simpler by the Government. Here is a step by step process on how to form a Nidhi Company in India

Step 1

One has to start by forming a Limited Company in India. A private limited company cannot be formed for a Nidhi Company. A public limited company has to be incorporated Remember the following are basic requirements for Forming a Limited Company in India 

  • 3 Directors 
  • 7 Shareholders 

Step 2 

Writing the Memorandum of Understanding (MOU) and Articles of Association (AOA) with the right clauses. Remember the basic idea behind formation of a Nidhi Company is Co-operation and benefit amongst members and to encourage Savings. As such these must be mentioned in the Company formation document at the right places. 

The Memorandum of Association for a Nidhi Company should be written in a way that clearly states its main goal. This main goal should be about encouraging its members to save money, collect deposits from them, and lend money to them for their mutual benefit. In simpler terms, a Nidhi Company's main job is to help its members save and borrow money for everyone's advantage.

For more ideas on how to draft your MOA and AOA, please Click Here to connect to one of our Experts.  

Step 3 

Once the formation of the Limited Company with proper detailing to its Objects are completed, the task of registration of its members starts and the governance also puts conditions to ensure risks are properly managed and controlled within the Company. As such the Nidhi Company needs to meet the following within 120 days of its formation 

  • Have more than 199 members, that is at-least 200. 
  • Have Funds (Net Owned) of at least or more than Rs 20 lakhs. 

Net owned here shall refer to 

            Share Capital 

Add:   Reserves and Surplus

Less:   Accumulated Losses 

Less:   Intangible Assets  

(This should be as per the latest Audited Balance Sheet) 

Step 4 

If the Nidhi Company can meet the above criteria, it needs to File a certified (From a Practicing Chartered Accountant or Company Secretary) NDH – 4 Form with the Registrar of Companies in India. The requisite fees as prescribed by the government from time to time needs to be deposited along with the form. If the Nidhi company cannot meet the requirements, then it can apply for an extension by filing form NDH – 2.  

In addition to filling out the details in the NDH-4 application, the company needs to provide a statement confirming that all its founders and directors are considered "fit and proper persons." This assessment is based on factors like their honesty, ethical behavior, and if they have any disqualifications related to criminal cases, financial misconduct, bankruptcy, or specific situations.

The Central Government will review the application made in NDH-4 and give its decision within 45 days. If they don't respond within this time, your application is automatically approved.

Once the Nidhi company meets the requirements outlined, the Central Government will officially declare this company as a Nidhi. This declaration will also be published in its Official Gazette.

Step 5 

Now, the company needs to inform the Registrar about this decision of the Central Government using Form INC-20A. Remember, the Nidhi company can only start its operations after getting the Central Government's decision in line with the declaration mentioned.

If the newly incorporated Nidhi company doesn't follow the conditions as stated above, it won't be able to submit Form No. SH-7 (Notice to Registrar of any change in share capital) and Form PAS-3 (Return of allotment). However, these rules don't apply to public companies formed under the Act before the Nidhi (Amendment) Rules, 2022. These regulations are in place to make sure that companies aiming for Nidhi status meet certain criteria to maintain honesty and safeguard the interests of members and stakeholders.

Limitations of a Nidhi Company in India

Remember that Nidhi company is formed with a certain specific agenda and objective in mind, and thus it needs to operate within the purview of those objectives only. Some of the limitations are enumerated below for your convenience: 

  • Carry on Business of Manufacturing or Trading or Providing services (it can though provide locker services to its members only) 
  • Carry on Business of Financial Services like Hire Purchase, Insurance or Brokerage etc. 
  • Take money from or loan money to anybody outside its own members and also not to any other corporate bodies 
  • Issue any advertisement for soliciting deposits. Private advertisements within members are allowed. 
  • Issue Debentures, NCDs or even Preference shares or any other type of Debt instrument 

To ensure compliance with all Nidhi Company regulations, please Click here to subscribe for our Annual Compliance Package 

Documents required to register a Nidhi Company 

Enumerated below are the list of documents required by various entities involved in the registration of a Nidhi Company in India.

Documents required for Indian Director 

  1. DIN Number
  2. Passport size photograph 
  3. PAN Card 
  4. List of interest in other Company(ies), LLP(s), Partnership(s), Sole Proprietorship(s) giving Name of entity, registration No., Designation, etc.
  5. Proof Of Identity (any one) (Name that matches with PAN)
    1. Voter's Identity Card or
    2. Passport or
    3. Driving License
  6. Residential Proof (anyone), (Name that matches with PAN)
    1. Bank statement or
    2. Electricity Bill or
    3. Telephone Bill or
    4. Mobile Bill

Requirement for NRIs and Foreign Directors are different, please connect to us for details 

Documents required for Member 


  1. PAN Card 
  2. Aadhaar Card
  3. Passport photo

Documents required for Registered Office 

Compulsory - any one

  1. Rent agreement
  2. Lease Agreement
  3. Ownership deed

And one shall also need an NOC from the Landlord 

Any one utility bill in the name of the owner (not older than 2 months). To confirm the identity of the Landlord, one of the following shall be required and which should not be more than 2 months old. 

  1. Electricity Bill
  2. Telephone Bill
  3. Water Bill
  4. Municipal Charges bill



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