Nidhi Company vs NBFC: Understanding Key Differences for Small Lenders in 2026

StartFilings
Jan 24
4 min read

Small lenders looking to enter the financial services sector face a crucial choice between forming a Nidhi company or registering as a Non-Banking Financial Company (NBFC). Both structures allow lending and deposit-taking activities, but they differ significantly in regulatory requirements, capital needs, and operational flexibility. In 2026, Nidhi companies stand out as the best entry point for small lenders due to their simpler compliance and lower capital thresholds.

This post explains why Nidhi companies offer a more accessible path for micro-lenders, compares them with NBFCs on key parameters, and highlights how StartFilings supports entrepreneurs in launching their micro-banking ventures.

What Is a Nidhi Company?

A Nidhi company is a type of non-banking financial institution recognized under Section 406 of the Companies Act, 2013. Its primary objective is to cultivate the habit of thrift and savings among its members and to lend money to them. Nidhi companies operate on a mutual benefit model, where members pool their savings and lend to each other.

Key Features of Nidhi Companies

Member-focused: Only members can deposit and borrow money.
Limited to Indian residents: Foreign investments are not allowed.
Simple regulatory framework: Governed by the Ministry of Corporate Affairs (MCA), not the Reserve Bank of India (RBI).
Lower capital requirement: Minimum net owned funds of ₹10 lakh.
Deposit acceptance: Can accept deposits only from members, making it easier to manage.

Nidhi companies are ideal for small lenders who want to start micro-lending activities without the heavy regulatory burden of NBFCs.

What Is an NBFC?

Non-Banking Financial Companies (NBFCs) are financial institutions registered under the Companies Act but regulated by the Reserve Bank of India (RBI). NBFCs provide a wide range of financial services, including loans, asset financing, and deposit acceptance.

Key Features of NBFCs

Broader financial services: Can lend to the public and accept deposits.
RBI regulation: Subject to strict compliance and supervision.
Higher capital requirement: Minimum net owned funds of ₹2 crore.
Deposit acceptance: Allowed from the public but under stringent RBI guidelines.
Greater operational flexibility: Can serve a wider customer base beyond members.

NBFCs suit larger lenders with the capacity to meet regulatory demands and capital thresholds.

Comparing Nidhi Companies and NBFCs

The following table summarizes the main differences between Nidhi companies and NBFCs, focusing on parameters important to small lenders.

Parameter	Nidhi Company	NBFC
Regulatory Authority	Ministry of Corporate Affairs (MCA)	Reserve Bank of India (RBI)
Minimum Capital Requirement	₹10 lakh (net owned funds)	₹2 crore (net owned funds)
Deposit Acceptance	Only from members	From public under RBI guidelines
Compliance Complexity	Relatively simple	Stringent and detailed
Operational Scope	Lending to members only	Lending and financial services to public
Registration Process	Faster and less costly	Lengthy and expensive
Reporting Requirements	Basic annual filings with MCA	Regular RBI reporting and audits

Why Nidhi Companies Are the Best Entry Point for Small Lenders

Lower Capital Barrier

The ₹10 lakh net owned funds requirement for Nidhi companies is significantly lower than the ₹2 crore required for NBFCs. This makes Nidhi companies accessible to entrepreneurs with limited initial capital.

Simplified Regulation

Nidhi companies fall under the MCA, which has less stringent compliance compared to RBI. This reduces the cost and complexity of regulatory adherence, allowing small lenders to focus on business growth.

Easier Deposit Acceptance

Nidhi companies can accept deposits from their members without the extensive RBI guidelines that NBFCs must follow. This flexibility helps small lenders build a deposit base quickly.

Faster Setup

Registering a Nidhi company is faster and less expensive than obtaining NBFC registration. This speed is crucial for entrepreneurs eager to start lending operations without long delays.

Focused Lending Model

Since Nidhi companies lend only to their members, they operate within a trusted community. This reduces credit risk and simplifies loan management for small lenders.

Eye-level view of a small community bank building with a welcoming entrance — Small community bank building representing Nidhi company lending

How StartFilings Helps Entrepreneurs Launch Micro-Banking Ventures

StartFilings specializes in helping entrepreneurs navigate the regulatory landscape to start their micro-lending businesses. Here’s how StartFilings supports small lenders choosing between Nidhi companies and NBFCs:

Expert Guidance: Advises on the best structure based on capital, business goals, and compliance capacity.
Registration Support: Handles documentation and filing for Nidhi company incorporation or NBFC registration.
Compliance Assistance: Offers ongoing support for annual filings, audits, and regulatory updates.
Customized Solutions: Tailors services to meet the unique needs of micro-lenders and small financial institutions.
Cost-Effective Packages: Provides affordable options to reduce the financial burden of starting a lending business.

By partnering with StartFilings, entrepreneurs can avoid common pitfalls and accelerate their journey into micro-banking.

Practical Example: Starting a Small Lending Business in 2026

Consider two entrepreneurs, Raj and Meera, both interested in starting a lending business with ₹15 lakh capital.

Raj chooses a Nidhi company: He easily meets the ₹10 lakh capital requirement and registers under MCA. He starts accepting deposits from members and lending within the community. His compliance costs remain low, and he grows steadily.
Meera opts for an NBFC: She faces the ₹2 crore capital hurdle and must raise additional funds. The RBI registration process takes months, with complex documentation and audits. Her operational costs are higher, and she must comply with strict deposit acceptance rules.

For Raj, the Nidhi company model offers a practical, affordable, and faster path to micro-lending success.

Important Considerations When Choosing Between Nidhi Company and NBFC

Business Scale: If you plan to serve a broad public base, NBFC is suitable. For community-focused lending, Nidhi companies work better.
Capital Availability: Assess your ability to meet the ₹2 crore NBFC capital requirement.
Regulatory Readiness: Consider your capacity to handle RBI’s compliance demands.
Growth Plans: NBFCs offer more flexibility for expansion but require more resources.
Deposit Strategy: Nidhi companies accept deposits only from members, limiting funding sources.

Summary Table of Key Differences

| Aspect | Nidhi Company | NBFC |

|-------------------------|----------------------------------|------------------------------------|

| Capital Requirement | ₹10 lakh | ₹2 crore |

| Regulator | MCA | RBI |

| Deposit Acceptance | Members only | Public under RBI rules |

| Compliance Complexity | Low | High |

| Setup Time | Short | Long |

| Operational Scope | Limited to members | Wide-ranging financial services |

Small lenders aiming to start micro-banking in 2026 will find Nidhi companies a practical and cost-effective choice. With lower capital needs, simpler regulations, and easier deposit acceptance, Nidhi companies provide a strong foundation for community-based lending.