MCA cautions public against high-return promises by non-compliant Nidhi companies

The Ministry of Corporate Affairs (MCA) has issued a public advisory on Nidhi companies, urging people to verify a firm's credentials before investing, particularly when it promises unusually high returns.

During its scrutiny of applications filed in Form NDH-4, the ministry found that several companies operating as Nidhis were not fully complying with the Companies Act, 2013 and the rules framed under it. Many such firms had also failed to submit their NDH-4 applications within the prescribed deadline.

Any company that wants to function as a Nidhi must file Form NDH-4 to be declared or updated as one. The advisory notes that some companies have been luring members with assurances of abnormally high returns, and cautions the public against relying solely on such promises made by agents or through informal assurances.

Investors have been asked to independently confirm whether a company has been declared a Nidhi by the Central Government and to carefully study the terms before committing funds.

A key risk flagged in the advisory is that deposits accepted by Nidhi companies are not covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC). If such a company fails or is hit by fraud, recovering the deposited money can be very difficult or only partial.

Nidhi companies are mutual-benefit entities regulated by the MCA under the Companies Act, 2013 and the Nidhi Rules, 2014. They are permitted to accept deposits and extend loans only to their own members.

Under Section 620A of the erstwhile Companies Act, 1956, companies wishing to operate as Nidhis had to be declared as such by the Central Government. Section 406 of the Companies Act, 2013 initially allowed a company to incorporate itself as a Nidhi and function accordingly, subject to the Nidhi Rules, 2014.

Section 406 and the Nidhi Rules were amended with effect from 15 August 2019, reintroducing the requirement of a Central Government declaration along the lines of the 1956 Act.

A list of 395 companies declared as Nidhis by the Central Government under the provisions of the Companies Act, 1956 and 2013 is available on the MCA website. The list of active Nidhi companies published on the portal on 3 November 2025 can be accessed for further information.