1. Basic Functional Framework

• A Nidhi Company functions as a mutual benefit organization.
  
• It is formed to promote savings among members and provide financial assistance through loans.
  
• Only registered members can contribute to deposits and apply for loans.
  
• The functioning is governed by the Companies Act, 2013, and the Nidhi Rules, 2014.
  
• The company must adhere strictly to its object clause as defined in its Memorandum of Association.
  

2. Deposit Mobilization Activities

• Members can deposit money in the form of fixed deposits, recurring deposits, and savings deposits.
  
• Interest is paid on such deposits at rates prescribed within the limits of the Nidhi Rules.
  
• The company must maintain at least 10% of total deposits as unencumbered term deposits.
  
• It cannot accept deposits exceeding 20 times the Net Owned Funds.
  
• The collected deposits are used only for lending to the members.
  

3. Lending and Loan Operations

• Loans are issued only to members and not to outsiders.
  
• Loans are given against approved securities such as gold, fixed deposits, or immovable property.
  
• The interest rates on loans are regulated and must be within the prescribed limits.
  
• The purpose of loans is generally for personal, business, or emergency needs of members.
  
• The loan repayment must follow strict compliance with the Nidhi Rules.
  

4. Member-Centric Functioning

• A Nidhi Company cannot carry out business with the general public.
  
• Membership is open to individuals who agree to subscribe to the shares of the company.
  
• The company must reach a minimum of 200 members within one year of incorporation.
  
• Members have voting rights and can participate in the company’s decision-making.
  
• Transactions, including deposit and loan facilities, are allowed only for registered members.
  

5. Administrative and Compliance Mechanism

• The company is managed by a board of directors as per its Articles of Association.
  
• Regular board meetings and record keeping are required under the Companies Act.
  
• Annual compliance includes filing returns like NDH-1, NDH-3, AOC-4, and MGT-7.
  
• Financial statements and statutory audit reports must be submitted to the Registrar of Companies.
  
• Compliance with operational, financial, and member-related rules is monitored by the Ministry of Corporate Affairs.