A Nidhi Company, regulated under the Companies Act of 2013 in India, is a non-banking financial entity that operates with the primary objective of cultivating the habit of thrift and savings among its members. Nidhi Companies are essentially mutual benefit societies, fostering a culture of financial prudence and collective savings within a community.

The key distinguishing feature of a Nidhi Company is its focus on accepting deposits and providing loans only to its members, making it similar to a mutual benefit society or a cooperative society. These deposits and loans are typically provided at reasonable interest rates, aimed at promoting financial inclusion and empowering individuals, especially in rural and semi-urban areas, to meet their financial needs.

Nidhi Companies are primarily formed by individuals with a common bond, such as belonging to the same community, locality, or profession. They operate on the principle of mutual trust and cooperation, with the collective welfare of their members as the central focus.

To register as a Nidhi Company, the promoters must comply with certain regulatory requirements outlined by the Ministry of Corporate Affairs (MCA). These requirements include having a minimum number of members, maintaining a minimum net-owned fund, and adhering to specific rules regarding deposits, loans, and investments.

Once registered, a Nidhi Company can accept deposits from its members, subject to certain limits prescribed by the MCA, and provide loans against such deposits for productive purposes, such as housing, education, or small business ventures. However, Nidhi Companies are prohibited from engaging in any other business activities, including trading, manufacturing, or speculative activities.

Nidhi Companies are subject to regulatory oversight by the MCA and are required to comply with reporting and disclosure requirements, including filing annual returns and financial statements. This ensures transparency and accountability in their operations and protects the interests of their members.

Overall, Nidhi Companies play a vital role in promoting financial inclusion, encouraging savings habits, and providing access to credit among underserved communities in India. By fostering a culture of thrift and mutual cooperation, they contribute to economic empowerment and social development at the grassroots level.