Nidhi Companies are registered Limited Companies involved in taking deposits and lending to its members. The activities of a Nidhi Company does fall under the purview of Reserve Bank of India, as it is similar to a NBFC. Hence, we can say Nidhi Company is a Non-Banking Financial Company (NBFC) which does not require any license from the RBI. It is ideal for Lending and Borrowing amongst Members. Nidhi Companies cannot deal with anybody other than its members.Companies Act 2013 and Nidhi Rules 2014 are the governing bodies regulating the functions and operations of Nidhi Company in India.

(A) Must have minimum 200 members within 12 months of Incorporation
(B) Net owned fund shall not be less than Rs. 10 Lacs
(C) Net owned funds to deposits ratio should be more than 1:20 at all times.
(D) Unencumbered deposits should not be less than 10 % of outstanding deposits.
(E) It cannot carry business ofleasing finance, hire purchase finance, chit fund, insurance, or acquisition of securities issued by any corporation.
(F) It can only deal with its members and cannot accept deposits from or give loans to some external individual or corporation.
(G) It cannot issue preference shares, debentures, or some other debt instruments in any form.
(H) It cannot perform vehicle finance business or microfinance business in India.
(I) A maximum of 20% p.a. rate of interest can be charged on loans.
(J) The maximum rate of interest that can be offered on saving deposit account shall not exceed 2% above the rate offered by Nationalised Banks.
(K) Rate of Interest that can be offered on Fixed and Recurring Deposit shall not exceed the maximum rate of interest prescribed by RBI for the NBFCs to offer on their deposits. The maximum limit of the rate of interest for NBFCs is also applicable to the Nidhi companies.
(L) Operations limited to district level for the first 3 Years. After completion of 3 years, 3 offices can be set up within the same district. For expansion out of the district, prior approval from the Regulator Director is required.
(M) It can only give loans against security. These securities may be Gold, Property, Fixed Deposits, Government Securities or Life Insurance Certificates.
(N) Pay any brokerage or incentive or commission for mobilising deposits from members or for granting loans.
(O) There should be strict adherence to statutory and tax compliances.