- Why in news
- On 24 September 2026, the Ministry of Corporate Affairs issued an advisory cautioning the public against high-return promises by non-compliant Nidhi Companies. It reiterated that Form NDH-4 filing is mandatory and that only 395 firms are declared Nidhis.
- What it is
- Nidhi companies are mutual-benefit companies that take deposits from and lend only to their members. They are regulated by the Ministry of Corporate Affairs under Section 406 of the Companies Act, 2013 and the Nidhi Rules, 2014. Their purpose is to build thrift and savings among members.
- Regulator
- Nidhi companies are regulated by the Ministry of Corporate Affairs under the Companies Act, 2013 and Nidhi Rules, 2014, not by the RBI for deposit insurance.
- Members only
- They can accept deposits from and lend to their members only.
- No deposit insurance
- Deposits in Nidhi companies are not insured by the DICGC, so recovery after failure or fraud can be hard.
- Form NDH-4
- A company wishing to function as a Nidhi must apply in Form NDH-4 to be declared or updated as a Nidhi.
- Declared Nidhis
- 395 companies are declared Nidhis by the Central Government, and the list is on the MCA website.
Don’t confuse with Nidhi company vs NBFC: Nidhi companies deal only with their members and are regulated by MCA. NBFCs lend to the public and are regulated by the RBI.
Don’t confuse with Section 620A (1956 Act) vs Section 406 (2013 Act): Section 620A of the 1956 Act provided for declaration of Nidhis by the Central Government. Section 406 of the 2013 Act governs Nidhis now, with declaration restored from 2019.
Laws, judgments and statutory bodies: 30 Prelims questions since 2013 (what the law says, who chairs, legal basis). In Mains, 44 news-triggered questions, most in GS2, asking for provisions and challenges.
Why it matters
- Warns small savers, who are often unaware of the risks, about unregulated deposit-taking.
- Pushes compliance with declaration rules in a mutual-benefit lending sector.
Problems
- Deposits have no DICGC insurance, so savers bear the loss in a failure or fraud.
- Many Nidhis do not file NDH-4 on time or follow the rules fully, and agents lure members with high returns.
Way forward
- Enforce NDH-4 compliance and act against non-compliant firms.
- Raise public awareness and ask savers to check the MCA list of declared Nidhis before depositing.
Put in your answer
Uninsured deposits: Nidhi deposits are not covered by DICGC, a gap in small-saver protection.
Declared Nidhis: Only 395 companies are declared Nidhis, a small number against the many entities operating as Nidhis.
- 2013Mains GS2 · Q11Assess legitimacy and accountability of SHGs and microfinance outfits
- 2017Mains GS2 · Q16Role of SHGs in development and government measures to promote them
- 2026Prelims Q99Statements on NBFCs: demand deposits, RBI registration, payment role, DICGC cover
- 2010Prelims Q25Whether NBFCs can acquire government securities and accept demand deposits
UPSC’s own questions that come close to this issue, from our Prelims and Mains banks.
No practice question for this one; the card may still help an answer. Why: Lasting topic on deposit safety; facts like NDH-4 and no DICGC cover exist, but UPSC rarely asks about such advisories.
Worth revising until Prelims 2028: most news questions come within two years of the event.