Nidhi company notified under section 620-A of the Companies Act is classified at present as “Mutual Benefit
Financial Company” by RBI and regulated by the Bank for its deposit taking activities and by DCA for its
operational matters as also the deployment of funds. These Companies enjoy exemption from core provisions of
the RBI Act viz. requirement of registration, maintenance of liquid assets and creation of reserve fund, and
RBI Directions except those relating to interest rate on deposits, prohibition from paying brokerage on
deposits, ban on advertisements and the requirement of submission of certain Returns. Such companies,
however, are allowed to deal with their shareholders only, for the purpose of accepting deposits and making
loans. There are a number of companies functioning on the lines of
Nidhi companies but not yet notified
by DCA.
