A nidhi company is a type of company in the Indian non-banking finance sector, recognized under section 406 of the Companies Act, 2013.[1] Their core business is borrowing and lending money between their members. They are also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company. They are regulated by Ministry of Corporate Affairs, which is also empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these companies deal with their shareholder-members only. Nidhi means a company which has been incorporated with the object of developing the habit of thrift and reserve funds amongst its members and also receiving deposits and lending to its members only for their mutual benefit.

Yes, the Deposits with such companies are safe and secure because the Ministry of Corporate Affairs and Reserve Bank of India has framed rules and regulations to ensure the safety and security of Deposits. And the Nidhi Company compulsorily abide by the rules of Central Government.

The Nidhi Company uses the funds in lending to shareholders as per Nidhi Rules. It lends such money in the form of small loan for business and finance.

Nidhi Companies are not allowed to do the following business:
1. They are not allowed to start the business of chit funds, Insurance, Hire Purchase Finance, Leasing Finance and acquisition of shares issued by companies.
2. Nidhi Company cannot issue securities such as preference shares, debentures etc.
3. They are prohibited from opening any current account with its members.
4. It cannot enter into partnership for doing lending and borrowing business.
5. It is not allowed to acquire any other company.