1. Restriction on Dealing with Non-Members

• Nidhi Companies can conduct financial transactions only with their registered members.
  
• They are not allowed to accept deposits or give loans to non-members.
  
• All services, including deposits and loans, must be confined to the member community.
  
• This restriction preserves the mutual benefit structure of the company.
  
• It ensures that external public or institutional funding is kept out of operations.
  

2. Restriction on Business Activities

• Nidhi Companies cannot engage in the business of chit funds, hire-purchase, leasing, or insurance.
  
• They are also prohibited from trading in shares, debentures, or other securities.
  
• They must not undertake microfinance or payment gateway services.
  
• Their functions are limited to accepting deposits and lending among members.
  
• Engaging in any unauthorized business may result in the cancellation of the Nidhi status.
  

3. Restriction on Mode of Fundraising

• Nidhi Companies are prohibited from issuing preference shares, debentures, or any debt instruments.
  
• They cannot raise funds from the general public or any external sources.
  
• Equity shares are the only form of capital allowed to be issued.
  
• Raising money through advertising or solicitation to the public is not permitted.
  
• Deposits can be collected only under permitted schemes and from members.
  

4. Restriction on Branch Expansion

• A Nidhi Company can open branches only after fulfilling specific financial criteria.
  
• It must have earned net profits after tax continuously for three financial years.
  
• The number of branches is restricted to three within the same district.
  
• Opening more than three branches or inter-district branches requires Regional Director approval.
  
• Branches cannot be opened outside the state of incorporation without MCA permission.
  

5. Restriction on Advertisement and Promotion

• Nidhi Companies are not allowed to advertise their deposit schemes publicly.
  
• They cannot use marketing strategies that resemble commercial or public deposit institutions.
  
• The use of brokers, agents, or intermediaries to solicit deposits is prohibited.
  
• Any misleading or unauthorized promotional material is a violation of the Nidhi Rules.
  
• The company must follow silent and compliant promotion within its membership base.