Rule 4 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 4 sets the foundation of every Nidhi: it must be a public company with a minimum paid up equity share capital of ten lakh rupees, it may not issue preference shares, its memorandum may state only one kind of object, and its name must end with the words "Nidhi Limited". This article reads rule 4 as amended up to G.S.R. 413(E) dated 16 July 2024; later amendments should be checked. A company whose name needs correcting can look at our change of company name service.
A Nidhi shall be a public company with minimum paid up equity share capital of ten lakh rupees (raised from five lakh rupees in 2022; existing Nidhis have eighteen months from 19 April 2022). It cannot issue preference shares, and its only object may be thrift and mutual benefit among members. The name must end with "Nidhi Limited", and since July 2024 a company may not use those words unless it is declared a Nidhi under section 406(1).
Rule 4(1): public company and ten lakh rupees
As printed today, rule 4(1) reads: "A Nidhi shall be a public company and shall have a minimum paid up equity share capital of ten lakh rupees." Two amendments shaped it.
- G.S.R. 467(E), 1 July 2019 omitted the words "to be incorporated under the Act", so the sub-rule now describes a Nidhi generally, not only one yet to be incorporated.
- G.S.R. 301(E), 19 April 2022 substituted "ten lakh rupees" for the earlier, lower figure and added a proviso.
The proviso: "every Nidhi existing as on the date of commencement of the Nidhi Amendment Rules, 2022, shall comply with this requirement within a period of eighteen months from the date of such commencement." The commencement date is 19 April 2022. We give the rule's words and the commencement date and do not compute an end date.
Note that the minimum is of paid up equity share capital. Preference share proceeds do not count towards Net Owned Funds under rule 3(1)(d) and rule 9, which is a related but separate requirement; see our articles on rule 3 and rules 9 and 11.
Rule 4(2) and (3): preference shares
4(2): "On and after the commencement of the Act, no Nidhi shall issue preference shares." Rule 6(b) separately bars a Nidhi from issuing preference shares, debentures or any other debt instrument. See our article on rule 6.
4(3): "If preference shares had been issued by a Nidhi before the commencement of this Act, such preference shares shall be redeemed in accordance with the terms of issue of such shares." So earlier preference shares are not cancelled by the rule; they run off according to their own terms.
Rule 4(4): the only permitted object
"Except as provided under the proviso to sub-rule (e) to rule 6, no Nidhi shall have any object in its Memorandum of Association other than the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit."
The rule refers to "sub-rule (e) to rule 6"; rule 6(e) is a clause, not a sub-rule, and the reference is quoted as printed. The proviso to rule 6(e) allows locker facilities on rent to members, for Nidhis that have adhered to all the provisions of the rules, within the income limit stated there (twenty per cent of gross income). So the memorandum has one object, with that proviso as the only stated exception.
In practice, this means a Nidhi cannot add a second line of business to its memorandum as a way around the restrictions in rule 6.
Rule 4(5): the name
As amended in 2019, rule 4(5) reads: "Every 'Nidhi' shall have the last words 'Nidhi Limited' as part of its name." The 2019 amendment omitted the words "Company incorporated as a" from the sub-rule.
G.S.R. 413(E), 16 July 2024 added a proviso: "a company shall not use the words 'Nidhi Limited' in its name unless it is declared as such under sub-section (1) of section 406 of the Act." So the name is both a requirement for a Nidhi and a restricted description for any other company. A company that has not yet been declared under section 406(1) should read the proviso carefully before adopting or keeping a name with those words. The Rules themselves do not describe a name-change procedure.
Rule 4 at a glance
| Sub-rule | What it requires | Amended by |
|---|---|---|
| 4(1) | Public company; minimum paid up equity capital of ten lakh rupees; eighteen months for existing Nidhis from 19 April 2022 | 2019 (words omitted), 2022 (figure and proviso) |
| 4(2) | No preference shares on or after commencement of the Act | None |
| 4(3) | Earlier preference shares redeemed per terms of issue | None |
| 4(4) | Only object: thrift, savings, deposits from and loans to members | None |
| 4(5) | Last words "Nidhi Limited" in the name | 2019 (words omitted), 2024 (proviso) |
Example
Gagan Mutual Nidhi Limited had paid up equity capital below the new minimum on 19 April 2022. Under the proviso it must reach ten lakh rupees within eighteen months from that commencement date. Another company, Gagan Traders Limited, has not been declared a Nidhi but wants to rename itself Gagan Savings Nidhi Limited. The 2024 proviso says it may not use those words unless it is declared as such under section 406(1).
Links with other rules
Rule 4 does not stand alone. Rule 5 sets the number of members and the Net Owned Funds position, rule 8 the membership limits, and rule 3B the route for a new Nidhi; see our article on rule 3B. The Act's side is covered in our post on section 406.
Need help with a Nidhi name or capital change?
If your company must adjust its name to meet the 2024 proviso, or review its position under rule 4, our change of company name support can work through the process with you alongside the capital review.
Key takeaways
- A Nidhi must be a public company with minimum paid up equity share capital of ten lakh rupees.
- Existing Nidhis had eighteen months from the commencement of the 2022 amendment (19 April 2022).
- No Nidhi may issue preference shares; earlier ones are redeemed per their terms.
- The only object in the memorandum is thrift and mutual benefit among members, with the locker proviso in rule 6(e) as the stated exception.
- The name must end with "Nidhi Limited", and from 16 July 2024 those words may not be used unless the company is declared under section 406(1).
Read next
- Rule 3B: declaration within 120 days and fit and proper criteria
- Rule 6: general restrictions on a Nidhi
- Nidhi company formation: guide
- How to set up a Nidhi company
Disclaimer: Based on the Nidhi Rules, 2014 as notified (G.S.R. 258(E), 31 March 2014) and as amended by G.S.R. 467(E) of 2019, G.S.R. 81(E) and 114(E) of 2020, G.S.R. 301(E) of 2022, G.S.R. 35(E) of 2023 and G.S.R. 413(E) of 2024, as consulted on 3 October 2026. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.