1. Definition of Net Owned Fund (NOF)

• Net Owned Fund refers to the core capital that a Nidhi Company must maintain.
  
• It is calculated as the aggregate of paid-up equity share capital and free reserves.
  
• From this total, accumulated losses and intangible assets are deducted.
  
• The resulting figure is the company’s Net Owned Fund.
  
• NOF is an indicator of the financial strength and stability of the company.
  

2. Minimum NOF Requirement

• Every Nidhi Company must maintain a minimum Net Owned Fund of ₹10 lakhs.
  
• This requirement must be fulfilled within one year of incorporation.
  
• It is a statutory obligation under Rule 5 of the Nidhi Rules, 2014.
  
• The company must continue to maintain this amount throughout its operations.
  
• Failure to meet the NOF requirement may result in regulatory action or loss of status.
  

3. Link Between NOF and Deposits

• A Nidhi Company’s ability to accept deposits is directly tied to its NOF.
  
• The maximum deposit limit is 20 times the Net Owned Fund.
  
• If the NOF increases, the deposit acceptance capacity also increases proportionally.
  
• The company must monitor and report this ratio in compliance filings.
  
• Overstepping the NOF-deposit ratio is considered a violation of Nidhi Rules.
  

4. Role of Free Reserves and Equity Capital

• Free reserves include retained earnings, surplus from operations, and undistributed profits.
  
• Paid-up equity share capital includes only fully paid ordinary shares held by members.
  
• Preference share capital and revaluation reserves are excluded from NOF.
  
• NOF must be funded from legitimate and accounted sources.
  
• Any artificial inflation of reserves is subject to audit scrutiny.
  

5. Reporting and Compliance

• NOF status must be declared in Form NDH-1 within 90 days of incorporation.
  
• Auditors must verify the NOF annually in financial statements.
  
• Form NDH-3 also reflects the NOF-to-deposit ratio for each half-year.
  
• Any shortfall in maintaining NOF must be addressed or reported with Form NDH-2 for extension.
  
• Continuous compliance with NOF norms is essential for retaining Nidhi Company recognition.