NIDHI Company/ Mutual Benefit Company


Includes all states except Kerala, Punjab and Madhya Pradesh

Just like the bank


What is?

As per section 406 of Companies act, 2013, “NIDHI Company” means a company which falls under the category of NBFC (Non-Banking Financial company) and can lend and borrow the money within its members only. It is also called “Mutual Benefit Company” and regularized by various laws such as the Companies Act 2013 and NIDHI Act 2014.

Advantages are:

  • No need for RBI License and approval.
  • Its formation is simple as compare to other NBFC’s companies.
  • The government prefers over any other entity for tenders’ purposes.
  • Can accept funds from only its members
  • Enjoy the right of the separate legal entity.
  • Enjoy all the rights as of a public company per subject to certain conditions.

How to?

  • Minimum 3 directors and 7 members are required for incorporation purpose.
  • Firstly, each has to apply for DIN and DSC simultaneously.
  • Choose the Name (terms and conditions are applied) and apply to ROC for approval.
  • Draft MOA and AOA (terms and conditions are applied).
  • Then CIN no. will be issued at once documents are verified.

Documents requirement?

  • Copy of PAN card of all directors
  • Identity proof of all directors (Aadhar Card/ Voter ID card)
  • Utility bill (Electricity bill/Water Bill/ Gas Bill/ Mobile Bill) not less than 2 months old of the business address.
  • Drafted MOA and AOA.
  • Passport size photo of all directors
  • Copy of owner property proof (If the property is owned).
  • Copy of Rent agreement/Leased agreement (If rented/leased).

Frequently asked questions

Nidhi company/ Mutual benefit company

Minimum requirement of members is 7 out of which 3 must be the directors of the company at the time of incorporation.

Yes, 4 conditions which are listed below must be fulfilled by NIDHI company within a year of incorporation:

  1. Nidhi company should have at least 200 members within a year from incorporation.
  2. The Nidhi company should focus on the ratio of the net owned fund to deposit should not be more than 1:20.
  3. Nidhi company also keeps the net owned fund at least ` 10 lacs or more.
  4. Nidhi company must ensure that unencumbered (free of burden) term deposit must be at least 10% of the term deposit.

Net owned fund in Nidhi company is calculated as below

NOF= (Equity share capital paid up + Free Reserves) – (Accumulated loss + Intangible assets)


  1. All figures should be taken from the last audited balance sheet.
  2. Free reserves mean the reserves which are freely available for distribution of dividend like general reserve, profit and loss a/c, Revenue reserves, voluntary reserve, etc.

No, Nidhi company can’t advertise in public for deposit.

Nidhi company is not allowed to do any of the following activities:

  1. Nidhi company doesn’t accept any deposit from the public directly or indirectly.
  2. Nidhi company cannot carry any business related to leasing financing, hire purchase, chit funds.
  3. Nidhi company can not issue any other type of securities to its members other than equity share.
  4. Nidhi company can not pledge any security of its members which is kept as collateral.


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