As RBI has exempted Nidhi Companies from the core provisions of RBI that are applicable for NBFC, there are various restrictions made for Nidhi Companies. Under Nidhi rules 2014, as of rule number 6 of Nidhi Rules:
1) A Nidhi company shall not carry any kind of chit fund business; neither can they hire, nor lease finances, insurances, or securities by any of the body corporates.
2) They cannot issue preferences shares, debentures, or any debt information by any name or in any form.
3) The Nidhi Companies cannot open any current account with any of its members.
4) They also cannot acquire any companies by purchasing their securities; neither can they control the board of directors in any way.
5) Nidhi Companies cannot even enter into arrangements for changes of company's management unless and until the company has passed a special resolution in any meeting with the approval of their regional directors, those who have jurisdiction over Nidhi.
6) The Nidhi Companies cannot even carry any other business in their own name other than lending and burrowing; provided Nidhi companies that have adhered all provision under these rules may provide a locker facility to its members on rent subject to the rental income from locker facilities must not exceed 20% of the gross income of the Nidhi at any time in the financial year.
7) Nidhi companies shall not borrow or lend money other than its members.
8) They cannot pledge any assets deposited by their members as security.
9) According to Nidhi rules, a Nidhi company shall not take deposits or lend money to any corporate body.
10) They cannot enter into a partnership arrangement only because of its lending and burrowing activities.
11) A Nidhi company cannot issue any advertisement in any form to request deposits, provided that private circulation of a fixed deposit scheme among the members will not be considered an advertisement.
12) Nidhi Companies cannot pay any incentives for mobilizing deposits, deploying funds, or granting loans.