GOVERNMENT OF INDIA
MINISTRY OF LAW, JUSTICE AND COMPANY
AFFAIRS
DEPARTMENT OF COMPANY AFFAIRS
NOTIFICATION
New Delhi, 26th July, 2001
G.S.R.
556(E).- In exercise of the powers conferred by sub-section (1) of section 637 A
of the Companies Act, 1956 (1 of 1956), the Central Government hereby directs that
:-
1.
Every company declared as a Nidhi or Mutual Benefit Society under section
620A of the Companies Act, (hereinafter referred to as such Nidhi or Mutual
Benefit Society) after the publication of this notification shall adhere to the
following prudential norms for revenue recognition and classification of assets
in respect of mortgage loans / jewel loans, etc. namely: -
(i)
Income including
interest or any other charges on non-performing assets shall be recognised only
when it is actually realised. Any
such income recognised before the asset became non-performing and remaining
unrealised shall be reversed in the
current year’s profit and loss account
(ii)
Classification of assets :
(a)
Mortgage Loan
|
NATURE OF
ASSET |
PROVISION
REQUIRED |
|
Standard
Asset |
No
provision |
|
Sub-standard
Asset |
10% of the
aggregate outstanding amount |
|
Doubtful
Asset |
50% of the
aggregate outstanding amount* |
|
Loss
Asset |
100% of the
aggregate outstanding amount |
·
Note - The estimated realisable value of the collateral
security to which such Nidhi or the mutual benefit society has valid recourse
may be reduced from the aggregate
outstanding amount if the proceedings for sale of mortgaged property have been
initiated in a court of law within the previous two years of
the
interest, income or instalment remaining unrealised. In no case the value of collateral
security would be more than the value assessed at the time of grant of loan. The
provisions should be made out of current year's profit and so distinctly
disclosed in the current year's profit and loss account .
Explanation
: In this direction,-
(1)
“Standard asset”
means the asset in respect of which no default in repayment of principal or
payment of interest is perceived and which does not disclose any problem nor
carry more than normal risk attached to the business;
(2)
“Sub-standard
asset” will be that borrowal account which is a non performing asset. reschedulement or renegotiations or rephasement of the loan instalment or interest
repayment would not change the classification of assets unless the borrowal
account has satisfactorily performed for at least 12 months after such
reschedulement or renegotiation or
rephasement ;
(3)
“Doubtful Asset”
will be those borrowal account which remained non-performing for more than one
year but upto two years.
(4)
“Loss Asset” will
be that borrowal account which remained non-performing for more than two years
or where the documents executed may
become invalid if subjected
to legal processes, as per the opinion of the Nidhi, or its internal auditor or
by the inspecting authority during the course of its
inspection;
(5)
“Non-performing
asset” will be that borrowal account where interest income and / or instalment
of loan towards repayment of principal amount remained unrealised for 12
months.
(b)
Loans against jewellery, government securities
or
own deposits, etc.
The aggregate outstanding amount of loan granted against the
security of gold, jewellery, Government securities and own deposits, should be
recovered within next three months after the due date of repayment specified at
the time of grant of such loans. In case of interest income and/or instalment of
such loans remaining unrealised as per repayment schedule, the Nidhi should
enforce its claim against the security within three months of such due date of
repayment by the borrowers and make 100 percent provision to the extent of
unrealised amount being the deficit in the current years profit and loss
account.
2.
The above prudential norms for
revenue recognition and classification of assets shall be applicable to
all Nidhi companies notified under section 620 A of the Companies Act, 1956
before or after the publication of this notification and to all potential Nidhi
companies desiring to get Nidhi
status under the said Act.
3.
The Central Government if satisfied that the circumstances have arisen
and if found in public interest, after recording the reasons in writing, may
relax any of the directions
mentioned above either generally or for
any specified period, subject to such terms and conditions, as Government may
specify, for avoiding any hardship
to any Nidhi or a class of Nidhis .
[F.No. 5/7/2000-CL.V]
A. RAMASWAMY,
Joint
Secretary