Nidhi Company Rules 2026: Registration, NDH-4, Limits

A Nidhi company is a public limited company under Section 406 of the Companies Act, 2013 that may accept deposits from, and lend to, its members only. Under the Nidhi Rules, 2014 as amended in 2022, it needs ₹10 lakh paid-up equity capital to incorporate and, within 120 days, 200 members, ₹20 lakh net owned funds and an NDH-4 application; it cannot take deposits until the Central Government declares it a Nidhi.

Nidhis are regulated by the Ministry of Corporate Affairs, not licensed by the RBI, which is why the rules are strict about who the money comes from and where it goes. This guide covers eligibility, the main rules, the declaration process, deposit and loan limits, prohibited activities and the compliance calendar as they stand in October 2026.

Who can form a Nidhi company?

A Nidhi suits a defined community, such as traders in a market, employees of a group or residents of a locality, that wants to pool savings and lend to its own members. It does not suit anyone who wants to lend to the public or to businesses; that needs an NBFC registration with the RBI.

For charitable or community work without member lending, a Section 8 company is the usual route instead.

Every promoter and director must also meet the fit-and-proper criteria added in 2022. Among other things, a person cannot be a director of five or more Nidhis or a promoter of three or more, and pending criminal complaints, wilful-default tags or regulatory debarment can disqualify a person.

Nidhi Rules 2014 as amended in 2022: the key requirements

Net owned funds and the 120-day window

Net owned funds means paid-up equity capital plus free reserves, less accumulated losses and intangible assets. A company that starts with exactly ₹10 lakh needs to raise at least another ₹10 lakh of equity (or reserves) within 120 days to reach ₹20 lakh. In practice this comes from the new members' share allotments, each filed with PAS-3.

If NDH-4 is not filed within 120 days, the company cannot file SH-7 (alteration of share capital) or PAS-3 (return of allotment) with the Registrar, which effectively freezes it.

Step-by-step: from incorporation to declaration

• Step 1 — Eligibility: seven founding members, three directors, ₹10 lakh paid-up equity and fit-and-proper checks on every promoter and director.
• Step 2 — DSCs and name: SPICe+ Part A for a name ending in "Nidhi Limited" (₹1,000).
• Step 3 — SPICe+ Part B with the Nidhi MOA (member-only deposit and lending objects), AOA and AGILE-PRO-S; pay stamp duty.
• Step 4 — Certificate of Incorporation with CIN, PAN and TAN.
• Step 5 — Members and capital: allot fully paid ₹10 shares to reach 200 members and ₹20 lakh NOF; file PAS-3 for each allotment.
• Step 6 — NDH-4 within 120 days of incorporation, with fit-and-proper declarations and proof of members and NOF.
• Step 7 — Declaration within 45 days of the application (or deemed approval); file the approval with INC-20A.
• Step 8 — Start accepting deposits and lending to members within the rules.

Our Nidhi company registration service plans the 120-day member and NOF build from day one, so NDH-4 goes in on time with clean fit-and-proper declarations.

Deposit and loan limits

Deposits

A Nidhi can accept fixed deposits of 6 to 60 months, recurring deposits of 12 to 60 months and savings deposits, only from members. Total deposits cannot exceed 20 times net owned funds, and at least 10% of outstanding deposits must sit in unencumbered term deposits. Interest on deposits cannot exceed the maximum rate the RBI allows NBFCs to pay on public deposits.

Loans

Loans go only to members and only against the securities listed in Rule 15, such as gold, silver and jewellery, immovable property, fixed deposits with the Nidhi, and government securities or life insurance policies. Interest on loans cannot exceed 7.5% above the highest rate offered on deposits, calculated on a reducing balance. The ceiling per member depends on the Nidhi's total deposits:

Prohibited activities (Rule 6)

• Chit fund, hire purchase, leasing or insurance business, or acquiring securities issued by any body corporate
• Issuing preference shares, debentures or any other debt instrument
• Opening current accounts for members
• Accepting deposits from, or lending to, anyone who is not a member, or any body corporate
• Acquiring another company or entering into partnership arrangements in its lending activities
• Pledging members' deposited assets as security
• Paying brokerage or incentives for mobilising deposits or granting loans
• Advertising for deposits beyond the private circulation allowed to members
• Carrying on any business other than borrowing from and lending to members

Branches are also restricted by Rule 10: a Nidhi can open branches only after earning net profits after tax in each of the preceding three financial years, and only when its financial statements and annual returns are up to date with the Registrar.

Compliance calendar for a Nidhi company

NDH-1 and NDH-3 are certified by a practising CA, CS or CMA. Because a Nidhi is a public company, it also follows public-company rules on meetings and directors; see our comparison of public vs private limited companies.

Documents checklist

• PAN, identity proof and address proof (not older than two months) of all directors and subscribers
• Photographs, email IDs and mobile numbers
• Registered office utility bill, rent agreement or ownership proof, and owner's NOC
• Fit-and-proper declaration from every promoter and director
• Details of other Nidhis in which promoters or directors hold office
• Bank statement showing ₹10 lakh paid-up equity subscribed
• Register of members showing at least 200 members (for NDH-4)
• CA-certified statement of net owned funds (for NDH-4)

Common mistakes that sink NDH-4

• Fewer than 200 genuine members on the 120th day, or members added only on paper
• NOF below ₹20 lakh because accumulated losses or intangible assets were not deducted
• A director already on the boards of five Nidhis, or a promoter of three
• Deposits accepted or loans given before the declaration
• MOA objects that go beyond member-only deposits and lending
• Filing NDH-4 after the 120-day window
• Ignoring the 1:20 NOF-to-deposit ratio once deposits start flowing

Worked example

A traders' association in Kolkata incorporates ABC Nidhi Limited on 1 November 2026 with seven subscribers, three directors and ₹10 lakh paid-up equity. Over the next three months it allots ₹10 shares to 195 more traders and further equity so that NOF reaches ₹20 lakh. NDH-4 must be filed by 1 March 2027. If the Central Government does not decide within 45 days of filing, the application is deemed approved, and the company files INC-20A and starts business.

With ₹20 lakh of NOF, the 1:20 ratio caps deposits at ₹4 crore. At least 10% of whatever is outstanding must sit in unencumbered term deposits, so ₹1 crore of deposits means ₹10 lakh parked with a bank. While total deposits stay below ₹2 crore, no member can borrow more than ₹2 lakh.

Frequently asked questions