Nidhi Company Registration

Nidhi company registration for member lending and borrowing services.

A Nidhi company is a mutual benefit society incorporated under section 406 of the Companies Act to receive deposits from and lend to its own members, and to nobody else. It is a narrow, heavily conditioned structure: within 120 days of incorporation it must file Form NDH-4, and by the end of its first financial year it must have at least 200 members and net owned funds of ₹20 lakh, with a net-owned-funds-to-deposits ratio no worse than 1:20. Missing those tests is the ordinary way a Nidhi fails, and it fails early.

Who this is for

Member lending
Financial savings
MCA regulated
Professional credibility

The process

What we actually do

1
We check that the tests are achievable before incorporating
Two hundred members and ₹20 lakh of net owned funds within the first financial year are not aspirations, they are conditions. A Nidhi that cannot show them at NDH-4 is refused, and the structure is unusable. This conversation comes first.
2
We incorporate as a public company with the Nidhi object
A Nidhi is incorporated as a public limited company with at least seven members and three directors, with 'Nidhi Limited' in the name and the object clause restricted to the permitted activity.
3
We file NDH-4 within the window
The declaration is due within 120 days of incorporation and is what the Central Government uses to confirm Nidhi status. It is the filing that decides whether the company can operate as one.
4
We set the operating restrictions up correctly
No lending to non-members, no current accounts, no chit fund or hire purchase business, no advertising for deposits, and deposit and lending rates within the prescribed caps. These are not policy choices; a breach is a contravention.
5
We maintain the periodic returns
NDH-1 for members and net owned funds, NDH-3 half-yearly, alongside the usual company annual filings. The ratios have to be maintained continuously, not just met once.

Who this is for

Community groups intending to run a members-only savings and lending society
Existing informal chit or savings groups seeking a lawful corporate structure
Promoters who understand the 200-member and ₹20 lakh tests and can actually meet them

How long it takes

Twenty to thirty working days for incorporation, followed by the NDH-4 filing within 120 days. The membership and net owned funds tests run to the end of the first financial year, which is the real timeline.

If you do nothing

A Nidhi that misses NDH-4 or fails the membership and funds tests does not simply pause — it is a public limited company carrying full compliance obligations and unable to conduct the only business it was formed for. Deposits already accepted then sit outside the framework that was supposed to authorise them.

The law, in figures

Dates, thresholds and sections

Every figure below carries the provision it comes from, so it can be checked.
What	Figure	Source
Governing provision	Section 406, Companies Act 2013 read with the Nidhi Rules 2014	Nidhi Rules 2014, as amended in 2022
Minimum members by the end of the first financial year	200	Rule 5(1), Nidhi Rules 2014
Minimum net owned funds	₹20,00,000	Rule 5(1) as amended by the Nidhi (Amendment) Rules 2022
Net owned funds to deposits ratio	Not more than 1:20	Rule 14, Nidhi Rules 2014
Declaration filing	Form NDH-4 within 120 days of incorporation	Rule 3A, Nidhi Rules 2014
Permitted business	Borrowing from and lending to members only	Rule 6, Nidhi Rules 2014

What usually goes wrong

Incorporating without a realistic path to 200 members and ₹20 lakh, and failing NDH-4
Lending to non-members, which is the core prohibition and the commonest contravention
Advertising for deposits, which a Nidhi may not do in any form
Opening current accounts for members, which the rules prohibit
Letting the net-owned-funds-to-deposits ratio slip past 1:20
Paying a brokerage or commission on deposits, which the Nidhi Rules prohibit outright
Issuing preference shares, which a Nidhi may not do

What non-compliance costs

Refusal of Nidhi status on NDH-4, leaving a public company that cannot carry on the intended business
Penalty on the company and every officer in default for contravention of the Nidhi Rules
The usual ₹100 per day per form on late company annual filings

These are statutory amounts, not our fees. What we charge depends on your situation and is quoted before any work starts.

Not to be confused with

These come up in the same conversation and are routinely treated as the same thing. They are not.

A co-operative credit society

A credit society is registered under state or central co-operative law with a registrar of co-operatives, and is governed by that legislation. A Nidhi is a company under the Companies Act, supervised by the MCA, with the Nidhi Rules on top. Different statute, different regulator, different filings.

An NBFC

A non-banking financial company is licensed and supervised by the Reserve Bank of India and may lend to the general public. A Nidhi is expressly outside RBI licensing and may lend only to its own members — which is the whole basis of the exemption it operates under.

A chit fund

A chit fund is governed by the Chit Funds Act 1982 and works on periodic subscription and auction. A Nidhi may not carry on chit business at all; doing so is a breach of Rule 6.

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