Nidhi Company in India

General restrictions

Rule 6 provides general restrictions.   According to this Rule no Nidhi shall-

  • Carry on the business of
    • Chit Fund,
    • Hire Purchase Finance,
    • Leasing Finance,
    • Insurance or Acquisition of Securities issued by anybody corporate;


  • Issue
    • Preference Shares,
    • Debentures or
    • Any Other Debt Instrument by any name or in any form whatsoever;
  • Open any Current Account with its members;
  • Acquire another company by;
    • Purchase of securities or
    • Control the composition of the Board of Directors of any other company in any manner whatsoever or
  • 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;
  • 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.



? Nidhi’s which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding 20% twenty per cent of the gross income of the Nidhi at any point of time during a financial year.


  • A Nidhi shall not submit a body corporate or trust as a member.
  • Except as otherwise permitted under these rules, every Nidhi shall ensure that its membership is not reduced to less than 200 members at any time.
  • A minor shall not be admitted as a member of Nidhi.
  • But 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.


Share capital and allotment

Rule 7 provides that every Nidhi shall issue equity shares of the nominal value of not less than Rs.10/- each.  This requirement shall not apply to a company which has been declared as a Nidhi company.

Provided that this requirement shall not apply to a company referred below:

  • Every company which had been declared as a Nidhi or Mutual Benefits under Section 620A(1)of Companies Act, 1956;
  • Every company functioning on the lines of a Nidhi company or Mutual benefit society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under Section 620A (1) of Companies Act, 1956;


  • 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/-.

Leave a Reply

Your email address will not be published. Required fields are marked *

Post Navigation