The Ministry of Corporate Affairs (MCA) has issued an advisory to general public regarding Nidhi Companies and their functioning. It has warned against investment decisions related to such companies without conducting a proper background check, especially when such companies promise providing high returns to people. 

The Ministry discovered that many Nidhi Companies were not complying with applicable provisions and rules. Additionally, they had failed to file Form NDH-4 within prescribed timeline. 

What is a Nidhi Company?

A Nidhi Company is a non-banking financial company incorporated under the Companies Act, 1956/2013, with the aim of promoting savings and lending among its members. This type of company is primarily engaged in accepting deposits from and providing loans to its members. Non-members cannot avail services of such a company.

The Ministry of Corporate Affairs is responsible for regulating the Nidhi companies in India. All such companies must ensure compliance with Companies Act, Nidhi Rules and other relevant rules and regulations. 

Why Has MCA Issued an Advisory on Nidhi Companies?

The MCA felt the need to issue an advisory on Nidhi companies for a few reasons. During examination of NDH-4 applications by the Ministry, it was observed that many ‘Nidhi’ Companies were not fully complying with applicable provisions of Companies Act and rules made thereunder. It was noticed by Ministry that several companies operating as Nidhi Companies had failed to submit their NDH-4 applications within prescribed time frame outlined in Nidhi Rules. 

Every company wishing to operate as a “Nidhi” is required to file an application in Form “NDH-4” to obtain or update its declaration as a “Nidhi” as a mandatory requirement. The Ministry also found that many companies attract their members by promising them that they will get unusually high returns. 

The general public is advised not to rely solely on these promises or informal assurances alone while they are making financial decisions. The individuals should independently verify whether a company has been recognized as a Nidhi by Central Government and should carefully consider the terms involved. 

What is Form NDH-4?

Form NDH-4 is the prescribed form for declaration as a Nidhi company. A company needs to file this form for securing approval from the Central Government to operate as a Nidhi company in India. If this form is not filed and the company fails to get approval, then it cannot accept deposits from its members as a Nidhi company. 

Therefore, filing this form is of utmost importance for a company to obtain its Nidhi status. This form has to be filed online through MCA portal, usually within 120 days of Nidhi company incorporation.

Why Should You Be Careful About “High Returns”?

When a Nidhi company promises unusually high returns, then there is a chance that something may be wrong. Nidhi companies are basically mutual benefit groups formed to encourage savings among their members. They are not meant to be high-risk investment opportunities where you invest money with the expectation of very high returns. If a company tries to lure you with promises of high returns and you end up becoming a victim of fraud, recovering your deposits may become very difficult task. 

As MCA has also noticed, many companies that present themselves as Nidhis have not yet completed the required NDH-4 filing and obtained the required approval from the Central Government. Only a limited number of companies have been officially declared as Nidhis. Therefore, it becomes very important for you to be extra careful when someone is offering unusually high returns in the name of a Nidhi company.

Always verify the company properly from your end before making any investment or depositing your money. Do not make a decision only because of a promotional promise or the attraction of high returns. Give priority to verified information and check the company’s active Nidhi status before taking any decision.

Are Deposits in Nidhi Companies Insured?

No. The deposits accepted by Nidhis are not insured by the Deposit Insurance and Credit Guarantee Corporation unlike certain eligible bank deposits. This means that if the company fails or experiences fraud, recovering deposited money can be really difficult. 

How to Check Whether a Company is a Declared Nidhi?

A total of 395 companies have been declared as Nidhis by Central Government under the provisions of the Companies Act, 1956/2013. Out of these companies, 298 are active and 55 have been converted to LLP/dissolved (liquidated)/struck off. The remaining 42 companies are under liquidation/under process of striking off/others.

This information is available for general public on the official MCA website. You can check the full list of Nidhi companies on this website. The list was published on the MCA portal on 3 November 2025. 

What Does MCA Advisory Mean for Public?

The purpose of the MCA advisory is to make the public aware of how Nidhi companies function and why proper verification is important before taking any investment-related decision with such companies. MCA is not saying that all Nidhi companies are unsafe. 

The main purpose of the advisory is to make people aware and careful so that they do not end up becoming victims of fraud or scams. Therefore, before depositing money or taking any investment decision, people should properly verify company’s status, filings and other details from reliable sources.

Also Read: Functions and Objectives of MCA

Conclusion

The main point of this article is that before depositing money with any Nidhi company or becoming its member, you should independently check the company’s regulatory status, as well as the terms and conditions applicable to Nidhis. Do not make your decision only on the basis of unusually high returns being promised by the company. Take the time to verify the company and understand the terms before making any decision involving your hard-earned money.

 

Reference: Press Information Bureau (PIB)