MCA Cautions Public Against High-Return Promises by Non-Compliant Nidhi Companies

Quick Answer

The Ministry of Corporate Affairs has advised the public to verify a company's status before becoming a member of, or investing in, a "Nidhi." MCA's review of Form NDH-4 applications found that many companies functioning as Nidhis have not complied fully with the Companies Act and Nidhi Rules, 2014, and that many have not filed NDH-4 within the prescribed timeframe. As of this advisory, only 395 companies stand officially declared as Nidhis by the Central Government — and deposits placed with Nidhi companies are not insured by the DICGC.

At a Glance

Why This Matters

Nidhi companies raise deposits from their own members and lend back to them — a mutual-benefit structure that has existed in India since the 19th century. MCA's advisory signals that a meaningful share of companies operating or marketing themselves as Nidhis have not properly completed the declaration process, and that some are attracting members using promises of unusually high returns. For members, prospective investors, and the professionals who advise them, this is a direct call to verify a company's actual declared status rather than relying on the "Nidhi" label alone.

How Nidhi Declaration Works

Under Section 620A of the erstwhile Companies Act, 1956, companies wishing to function as Nidhis were declared "Nidhis" by the Central Government. Under Section 406 of the Companies Act, 2013, the process initially changed — a company could incorporate itself as a Nidhi and start functioning as one, subject to the Nidhi Rules, 2014, without a separate Central Government declaration. Section 406 and the Nidhi Rules, 2014 were then amended with effect from 15.08.2019, reintroducing the declaration requirement along the lines of the 1956 Act. Since that amendment, every company wishing to function as a Nidhi has had to file an application in Form NDH-4 to be declared, or have its status updated, as a Nidhi.

What MCA Found

NDH-4 applications are examined by the Central Government. On examination, MCA observed two recurring issues:

• Many companies functioning as Nidhis are not complying with the applicable provisions of the Companies Act and the Nidhi Rules in toto.
• Many companies functioning as Nidhis have not submitted their NDH-4 application within the stipulated timeframe prescribed under the Nidhi Rules.

Separately, MCA notes that some companies lure members by promising unusually high returns, and cautions the public against relying on such promises, or on informal assurances from agents, when making financial decisions.

Key Warning: No DICGC Insurance

The 395 Declared Nidhi Companies

The list accompanying the advisory covers every company the Central Government has declared as a Nidhi under the Companies Act, 1956/2013, broken down by current status:

A large share of the active list consists of long-established mutual-benefit and permanent-fund societies concentrated in Tamil Nadu, Andhra Pradesh, and Kerala — many originally registered decades or, in some cases, over a century ago, alongside a smaller number of more recently incorporated Nidhis. The full company-wise list, with CIN details and status for all 395 entries, forms part of MCA's published document. Given its size, it isn't reproduced in full here — readers verifying a specific company should cross-check its name and CIN directly against the source list before treating it as a declared Nidhi.

What Should Investors and Members Do?

• Independently verify whether a company has actually been declared as a Nidhi by the Central Government, rather than relying on the company's own claim or an agent's word.
• Treat promises of unusually high or guaranteed returns as a red flag rather than a selling point.
• Remember that deposits with Nidhi companies carry no DICGC insurance, unlike bank deposits.
• Where a company is not found among the 395 declared Nidhis, or its status shows liquidation, dissolution, or striking-off, exercise caution before becoming a member or investor.

Frequently Asked Questions

What is a Nidhi company?
A Nidhi is a mutual-benefit company that raises deposits from, and lends to, its own members, operating under Section 406 of the Companies Act, 2013 and the Nidhi Rules, 2014.

How many companies are officially declared as Nidhis?
395, as per the list accompanying MCA's September 24, 2026 advisory — 298 active, 55 converted/dissolved/struck off, and 42 under liquidation, striking-off, or other status.

What form must a company file to be declared a Nidhi?
Form NDH-4, filed with the Central Government for declaration or updation of Nidhi status.

Are deposits in Nidhi companies insured?
No. Deposits accepted by Nidhi companies are not insured by the DICGC.

Why did MCA issue this advisory now?
Its examination of NDH-4 applications found many companies functioning as Nidhis without full compliance with the Act and Rules, and many that had not filed NDH-4 within the prescribed timeframe.

When did the Central Government declaration requirement return?
Section 406 and the Nidhi Rules, 2014 were amended with effect from 15.08.2019, reintroducing the requirement — after an earlier period where self-incorporation as a Nidhi was permitted without a separate government declaration.

What should someone do before investing in a company calling itself a Nidhi?
Verify the company's name and CIN against the Central Government's declared-Nidhi list and confirm its current status, rather than relying on promised returns or informal assurances.