Looking to start a loan or finance business in India? A Nidhi Company is one of the most accessible and cost-effective ways to begin. With a minimum of just seven members and simple documentation, it allows entrepreneurs to establish a financial institution focused on mutual benefit. The registration of a Nidhi Company requires an initial capital of ₹10 lakh.

Within 120 days of incorporation, the company must file Form NDH-4 to declare itself as a Nidhi Company by increasing its Net Owned Fund to ₹20 lakh and enrolling at least 200 members. This compliance is mandatory to maintain Nidhi status under the Companies Act.

A Nidhi Company is allowed to operate only within its membership base. It cannot accept deposits from or lend money to the general public. All transactions are limited to registered members, who can be added through a straightforward process. Unlike NBFCs, Nidhi Companies do not require RBI approval, making them the only type of company that can start a lending business legally in India without regulatory licensing from the Reserve Bank of India.

Understanding Nidhi Company – Key Features

A Nidhi Company functions as a community-based finance company where funds are mobilized by accepting deposits from members and providing loans to the same members. The primary revenue is generated through interest charged on loans, while its main expenses include interest paid on deposits such as Fixed Deposits (FD), Recurring Deposits (RD), and savings.

Nidhi Companies can earn up to 20% interest on loans using the reducing balance method and offer up to 12% interest on deposits. Once operational for three years, a Nidhi Company is permitted to open up to three branches within the same district to expand its services.

Loans can only be issued against approved securities such as gold, property documents, fixed deposits, or government securities. It is mandatory for the company to have at least 200 members within four months of incorporation. Nidhi Companies are not allowed to engage in microfinance, vehicle finance, or direct commercial lending.

Documents Required for Nidhi Company Registration

To register a Nidhi Company, each director and shareholder must provide a PAN card and recent passport-size photograph. Identity proof can be submitted in the form of Aadhaar card, voter ID, driving license, or passport. Address proof such as a bank statement, electricity bill, mobile bill, or landline bill (not older than 2 months) is also required.

For proof of the registered office address, you must submit the latest electricity bill or rent agreement, along with a No Objection Certificate (NOC) from the property owner.