nidhi company is a company registered under companies act and notifies as a nidhi company by central govt. u/s 620A of companies act It is a NBFC doing the business of lending and borrowing with its members and shareholders.
A chit fund is a kind of saving scheme practised in India. A chit fund company means a company managing , conducting or supervising As foreman , agent or any other capacity, chits as defined u/s 2 of the chit funds act 1982, according to section 2(b) of of chit funds act 1982, “ chit means a transaction whether called a chit, chit fund, chitty, kuri, or by any other name or by which a person enters into an agreement with a specified no. of persons, that everybody shall subscribe a certain sum of money ( or a certain amount of grain instead ) , by way of periodical installments over a definite period and that each such subscriber shall , in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement , be entitled to the prize amount .”
Such chit fund schemes may be conducted by organized financial institutions or may be unorganized schemes conducted between friends and relatives . There are also variations of chits where savings are done for a specific purpose .Chit fund also payed an important role in financial development of people of some states, such as Kerala. By providing easier access to credit. In kerala this is a common phenomenon practiced by a large section of society. In kerala there exists a company under the state govt., called Kerala State Financial Enterprise , the main business activity of it being the chit business. Chit funds are also sometimes misused by its promoters, and there are many examples of the founders running what is basically a fake scheme or ponzi scheme and absconding with their money.

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