Nidhi in the Indian context / language means “treasure”. However, in the Indian
financial sector it refers to any mutual benefit society notified by the Central
/ Union Government as a Nidhi Company. They are created mainly for cultivating the
habit of thrift and savings amongst its members.
The companies doing Nidhi business, viz. borrowing from members and lending to members
only, are known under different names such as Nidhi, Permanent Fund, Benefit Funds,
Mutual Benefit Funds and Mutual Benefit Company.
Nidhis are more popular in South India and are highly localized single office institutions.
They are mutual benefit societies, because their dealings are restricted only to
the members; and membership is limited to individuals. The principal source of funds
is the contribution from the members. The loans are given to the members at relatively
reasonable rates for purposes such as house construction or repairs and are generally
secured. The deposits mobilized by Nidhis are not much when compared to the organized
banking sector.