1. Regulatory Exemption from RBI

• Nidhi Companies are exempt from obtaining approval from the Reserve Bank of India.
  
• This exemption is due to their limited scope of business among registered members.
  
• Nidhi Companies do not perform full-scale banking or public financial activities.
  
• As per RBI directions, Nidhi Companies do not fall under the core regulatory framework of NBFCs.
  
• Their regulatory control lies with the Ministry of Corporate Affairs.
  

2. Jurisdiction of the Ministry of Corporate Affairs

• The registration and regulation of Nidhi Companies are handled by the Ministry of Corporate Affairs.
  
• All compliance, licensing, and filings are governed under the Companies Act, 2013.
  
• MCA supervises its operation through the Nidhi Rules, 2014.
  
• Approval for incorporation is obtained through the MCA’s online portal.
  
• Any changes in capital, structure, or object clause must be filed with the MCA.
  

3. Nature of Permitted Activities

• Nidhi Companies operate on a mutual benefit basis and deal only with their members.
  
• They are restricted to accepting deposits and giving loans to members.
  
• No services are offered to the general public, which limits their systemic financial risk.
  
• Because of this restricted scope, the RBI does not require its prior approval.
  
• Their activities must comply strictly with the rules laid out under the Nidhi Rules.
  

4. RBI’s Role in General Oversight

• Although prior approval is not required, Nidhi Companies must still avoid violating the RBI’s general directives.
  
• They cannot use names or practices that imply a connection to banking services.
  
• They must not undertake activities that overlap with those regulated by the RBI.
  
• Any deviation from permitted operations may lead to intervention from the RBI.
  
• Nidhi Companies are expected to adhere to financial discipline and prudence.
  

5. Incorporation and Operational Compliance

• To start a Nidhi Company, one must incorporate it as a public limited company.
  
• A minimum of 7 members and 3 directors are needed for registration.
  
• The company must have a minimum paid-up capital of ₹5 lakhs.
  
• Within one year, it must meet criteria such as 200 members and ₹10 lakhs net owned fund.
  
• All operations are monitored through annual and half-yearly filings with the Registrar of Companies.