Rules 7 and 8 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.
Rules 7 and 8 together decide who can be a member of a Nidhi and what shares each member must hold. Rule 7 deals with the shares: fully paid up equity of not less than ten rupees each, issued without a service charge, with a minimum holding for every depositor. Rule 8 deals with membership: no bodies corporate, two hundred members at all times, no minors and, since 2022, a cap on share transfers while a loan or deposit is running. Both are read as amended up to G.S.R. 413(E) dated 16 July 2024; later amendments should be checked. Share issues to depositors raise allotment of shares and PAS-3 filing questions as well.
A Nidhi issues fully paid up equity shares of not less than ten rupees each with no service charge. Every deposit holder must hold at least ten equity shares or shares equivalent to one hundred rupees; savings and recurring deposit holders need one equity share of ten rupees. Membership may not fall below two hundred, bodies corporate, trusts and minors cannot be members, and a member cannot transfer more than fifty percent of his shareholding while his loan or deposit subsists.
Rule 7: share capital and allotment
Rule 7(1): fully paid up equity shares
Rule 7(1) reads: "Every Nidhi shall issue fully paid up equity shares of the nominal value of not less than ten rupees each." The words "fully paid up" were inserted by G.S.R. 467(E) of 1 July 2019, after "shall issue". A Nidhi cannot allot partly paid shares.
The proviso says "this requirement shall not apply to a company referred to in sub-rules (a) and (b) of rule 2". Rule 2 has clauses, not sub-rules, so the reference is quoted as printed. The companies concerned are those declared as a Nidhi under the 1956 Act and those functioning on the lines of a Nidhi; see our article on rules 1 and 2.
Allotment records are filed by Form PAS-3, and a company that has not complied with rule 3A or rule 3B is barred from filing it; see our post on section 39 and the PAS-3 return.
Rule 7(2): no service charge
"No service charge shall be levied for issue of shares." A Nidhi cannot add a processing or service fee on top of the share price. The rule says nothing more on the point, so a charge of any kind on issue of shares is outside it.
Rule 7(3): the minimum holding for every depositor
"Every Nidhi shall allot to each deposit holder at least a minimum of ten equity shares or shares equivalent to one hundred rupees."
The proviso: "a savings account holder and a recurring deposit account holder shall hold at least one equity share of rupees ten."
| Depositor | Minimum holding under rule 7(3) |
|---|---|
| Fixed deposit holder (any other deposit holder) | At least ten equity shares, or shares equivalent to one hundred rupees |
| Savings account holder | At least one equity share of rupees ten |
| Recurring deposit account holder | At least one equity share of rupees ten |
With shares of the minimum nominal value of ten rupees, ten shares are equivalent to one hundred rupees. The rule links deposits to membership: a person who places a deposit also becomes a member by holding shares.
Rule 8: membership
Rule 8(1): no body corporate or trust
"A Nidhi shall not admit a body corporate or trust as a member." Rule 6(h) separately bars taking deposits from, or lending to, any body corporate; see our article on rule 6.
Rule 8(2): two hundred members at all times
"Except as otherwise permitted under these rules, every Nidhi shall ensure that its membership is not reduced to less than two hundred members at any time." Rule 5(1)(a) asks for two hundred members within one year of incorporation, and rule 3B(1) asks for the same number on an application within one hundred twenty days; see our articles on rule 5 and rule 3B. Rule 8(2) is the continuing duty.
Rule 8(3): no minors
"A minor shall not be admitted as a member of Nidhi." The proviso allows deposits to be accepted "in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi". The minor is not a member; the guardian is, and the deposit stands in the minor's name.
Rule 8(4): the transfer cap (2022)
Inserted by G.S.R. 301(E) of 19 April 2022: "A member shall not transfer more than fifty percent of his shareholding (as on the date of availing of loan or making of deposit) during the subsistence of such loan or deposit, as the case may be."
The proviso: "the member shall retain the minimum number of shares required under sub-rule (3) of rule 7 at all times."
Two limits therefore apply together: at most fifty percent of the holding as on the date of the loan or deposit may be transferred while the loan or deposit subsists, and the minimum holding in rule 7(3) must stay with the member whatever the percentage.
Worked example
Kamla opens a fixed deposit with Sundar Nidhi Limited and receives ten equity shares of ten rupees each, one hundred rupees in all. Rule 7(3) requires that holding. Later, when her deposit is running, she wants to transfer shares. Her holding on the date of the deposit was ten shares, so fifty percent is five shares, but the proviso to rule 8(4) says she must retain the minimum number of shares required under rule 7(3), which is ten. In this case, the minimum prevents any transfer while the deposit subsists.
Suppose instead that Kamla had been allotted forty shares when the deposit was made. Fifty percent is twenty shares; if she transfers twenty, she retains twenty, which is above ten, so the cap and the minimum are both satisfied. The rule does not say which limit prevails if they point different ways; both apply.
Now take Arjun, a savings account holder who holds one equity share of ten rupees. The minimum under the proviso to rule 7(3) is one share. He cannot transfer that share while a loan or deposit subsists.
Need help with Nidhi share allotments?
Issuing shares to each new depositor, tracking the transfer limit and filing the return of allotment are routine tasks in a Nidhi. Our allotment of shares and PAS-3 team can help set up the register and the filings.
Key takeaways
- Equity shares must be fully paid up and of not less than ten rupees nominal value each (rule 7(1), as amended in 2019).
- No service charge on issue of shares.
- Each deposit holder holds at least ten equity shares or shares equivalent to one hundred rupees; savings and recurring deposit holders hold at least one share of ten rupees.
- No bodies corporate, trusts or minors as members; a guardian who is a member may deposit in a minor's name.
- Membership must stay at two hundred or more at all times.
- During a loan or deposit, a member can transfer at most fifty percent of the shareholding held on the date of the loan or deposit and must keep the rule 7(3) minimum.
Read next
- Rule 5: 200 members, Net Owned Funds and NDH-1
- Rules 9 and 11: Net Owned Funds and the deposit ceiling
- Form PAS-3: purpose, applicability and format
- Section 406 of the Companies Act, 2013: Nidhi companies
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.