The Ministry of Corporate Affairs (MCA) has introduced stricter corporate governance norms for Nidhi companies, significantly raising accountability standards for their boards of directors. Under the revised framework, all Nidhi company boards must now include at least one independent director with professional finance experience, marking a departure from the traditional practice of member-only boards. New mandatory training programs will educate directors about their fiduciary responsibilities, particularly regarding deposit protection and risk management. The rules also impose stricter disclosure requirements for related-party transactions and mandate the formation of audit committees for larger Nidhi entities, bringing their governance standards closer to mainstream financial institutions.

These reforms specifically target several systemic vulnerabilities exposed in recent regulatory audits. Board members now face personal liability for failures in maintaining required liquidity ratios or violating member deposit limits. The MCA has introduced a “fit and proper” criteria evaluation for all directors, with mandatory annual declarations of conflict of interest. Digital board meeting platforms will become compulsory to ensure proper documentation of decision-making processes, particularly for loan approvals exceeding prescribed limits. These changes aim to professionalize governance while preserving the community-based nature of Nidhi operations.

The enhanced governance framework is being implemented in phases, with larger Nidhi companies given six months to comply and smaller entities twelve months. Early adopters will receive compliance incentives, including faster approval for branch expansions. While some industry voices have expressed concerns about increased operational costs, regulators emphasize that stronger governance is essential to maintain depositor confidence and prevent the sector’s misuse. These measures position Nidhi companies as more robust community finance institutions while addressing historical weaknesses that made them vulnerable to financial irregularities and mismanagement.