Nidhi Companies

The term "Nidhi" in the context of a Nidhi Company signifies "treasure" and originates from the Hindi language. What sets a Nidhi Company apart from other companies or NBFCs is its exclusive engagement in dealing with deposits from and loans to its members (shareholders), operating for the mutual benefits of its members. Consequently, certain exemptions have been granted to these companies concerning annual compliances and taxation. The primary aim of establishing a Nidhi Company is to promote savings and frugality among its members. To achieve this goal of instilling a culture of saving and thriftiness among its members, Nidhi companies are authorized to accept deposits from and lend to their members exclusively. In simpler terms, the funds contributed to a Nidhi company originate solely from its members (shareholders) and are designated exclusively for use by the shareholders of the Nidhi Company. A Nidhi Company falls under a specific category of NBFCs. While not directly regulated by the RBI, the RBI possesses the authority to issue directives related to their deposit acceptance activities. Furthermore, since these Nidhis exclusively engage with their shareholder-members, they have been exempted from the core provisions of the RBI Act and other directives applicable to NBFCs. Therefore, a Nidhi Company is deemed an ideal legal entity for accepting deposits from and lending to a specific group of people.