About Nidhi

“Nidhi” is a Hindi word, which means finance or fund. Nidhi means a company which has been incorporated exclusively with the object of developing the habit of thrift and reserve funds amongst its members, receiving deposits, and lending to its members only for their mutual benefit. Nidhi Companies are monetary business companies operating in India, However, since Nidhi deal with their shareholder-members only, RBI has exempted them from the core provisions of the RBI Act and other directions applicable to NBFCs. For any person to deposit funds or avail financial assistance from A Nidhi Company he shall first become member of a Nidhi Company..

Nidhis are also known as ‘Mutual Benefit Societies’ or ‘Mutual Benefit Companies’, terms given to it by the ‘Sabanyagam Committee on Nidhis’ and the ‘Expert Committee on Nidhi’ to distinguish it from other Co-operative societies and Banks which may engage in a similar kind of activity. The basic function of a Nidhi is to promote the savings and utilization of funds by its members and to safeguard the financial conditions of its members.

Difference between Nidhi Companies and most of the other companies?

Nidhi Companies works as a financial institution, but they have been exempted from the requirement of registration under Section 45 – IA of the RBI Act, 1934 as a Non-Banking Financial Company (NBFC) subject to certain conditions, as Nidhis are allowed to work only with its Members. Nidhi Companies are regulated by Ministry of Corporate Affairs, Government of India. Companies that do financial business but regulated by other regulators are given specific exemption by the Reserve Bank from its regulatory requirements for avoiding duality of regulation.