Nidhi Companies in India are created for cultivating the habit of thrift and savings amongst its members. Nidhi companies are allowed to borrow from its members and lend to its members. Therefore, the funds contributed to a Nidhi company are only from its members (shareholders). Hence, Nidhi companies are mainly used to cultivate a habit of savings amongst a group of people.

Nidhi Companies are registered Limited Companies involved in taking deposits and lending to its members. The activities of a Nidhi Company does fall under the purview of Reserve Bank of India, as it is similar to a NBFC. However, as Nidhi Companies ONLY deal with its shareholder-members money, RBI has exempted Nidhi Companies from the core provisions of the RBI and other regulations applicable to a NBFC.