Mutual Fund and Nidhi Company are two definite form of business. They are different from each other in terms of their aim, and the nature of the business. Mutual fund and Nidhi Company has a major divergence which is that the Nidhi Company is entitled to deal only with its members. In the case of mutual fund, there is no such restriction. Nidhi Company nature of business is lending and borrowing of money in between its members only. In Mutual fund business, the money can be received from any investors, henceforth welcoming the deposits and making investments. To build up a profitability savings, self-reliance among the individuals, individuals choose Nidhi Company. To win on the investments, individuals put resources into Mutual Funds. A Nidhi Company develops the habit of savings amongst its members. In the case of Mutual Fund, its main objection is to increase the wealth of the depositors. The deposits received from lending the money to the members of the Nidhi Company can only be used by the Nidhi Company. In the case of Mutual Fund, it can use the amounts of deposits received for making investments or use in chit funds, hire purchase, leasing finance.