G.S.R 737(E).-In exercise of the powers conferred by sub-section (1) of section 637A of the Companies Act, 1956 (1 of 1956), the Central Government hereby directs that –

1. No company declared as a Nidhi or Mutual Benefit Society under section 620A of the said Act, before the date of this notification (hereinafter referred to as such Nidhi or Mutual benefit Society) shall, after the publication of this notification,-

1. carry on the business of chit fund, hire purchase, insurance or any business in shares or debentures;

2. open any new branch in any place outside the local limits of the district wherein its Registered Office is located;

3. open any new current account with its members;

4. admit as member any body corporate or trust;

5. issue any new equity shares of nominal value exceeding rupees ten;

6. issue any new shares to any select group of persons other than bona fide depositors;

7. acquire control of any other company by way of acquisition of shares, or by composition of the Board of Directors of such company;

8. allow use of its name by any other body corporate whose main object is to earn profit by borrowing and lending;

9. enter into any financial dealing with any person other than its members;

10. take further deposits from or lend further money to any body corporate;

11. carry on any business other than the business of borrowing or lending in its own name;

     

12. enter into any new partnership arrangement in its borrowing or lending activities;

13. give any new loans or advances without the security in the form of fixed deposits or recurring deposits with the said Nidhi or Mutual Benefit Society or gold, silver, jewellery or immovable property;

14. pledge any type of security lodged with it by its members;

15. give to any borrower loans or advances exceeding –

1. two lakhs rupees, where the total amount of deposits of such Nidhi or Mutual Benefit Society from its members are two crores rupees or less;

2. one percent of the total deposits or seven lakhs fifty thousand rupees, whichever is less, where deposits of such Nidhi or Mutual Benefit Society from its members are more than two crores rupees but are twenty crores rupees or less;

3. twelve lakhs rupees, where the deposits of such Nidhi or Mutual Benefit Society from its members are more than twenty crores rupees but are fifty crores rupees or less;

4. fifteen lakhs rupees, where the deposits of such Nidhi or Mutual Benefit Society from its members are more than fifty, crores rupees.

1. cease to be such Nidhi or Mutual Benefit Society, under the Companies Act, 1956 (1 of 1956);

2. be deemed to be a non-banking financial company under clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934);

1. have branches outside the states in which its Registered Office is situated:

1. have not more than three branches in a State in which its Registered Office is situated:

2. have not more than three branches in a District in which its Registered Office is situated:

1. accept deposit for a period of less than six months;

2. grant loan to a director for an amount exceeding fifteen lakh

1. ensure that its membership is not reduced to less than two thousand members at any time;

2. obtain certificate every year from the statutory auditors certifying that it has complied with the directions specified in this notification and has maintained its books of account according to recognised principles of accounting; 

3. ensure that the total of its net owned fund and its preference share capital is not less than twenty five lakh rupees or such higher amount as the Central Government, may specify from time to time:

   Provided that the existing Nidhis or Mutual Benefit Societies shall reach before the 31^st day of December 2002, the said minimum amount of twenty five lakh rupees:

   Provided further that the Central Government may, after recording the reasons in writing for so doing, extend the said period:

4. ensure that interest rates on deposits accepted by and loans given by such Nidhis or Mutual Benefit Society are in conformity with such regulations that may be issued by the Reserve Bank of India, from time to time.

   Explanation.- "Net owned fund" shall have the same meaning as assigned to it in the Reserve Bank of India Act, 1934( 2 of 1934);

5. ensure that a person does not hold a post of a director in such Nidhi or Mutual Benefit Society for a continuous period of more than ten years:

   Provided that such director shall be eligible for re-appointment after the period of two years of ceasing to hold the post of director;

   Provided further that in case more than three directors vacate their office in the current year, then, two thirds of such directors shall vacate their office in the same current year and one- third in the successive year.

6. maintain a contingent fund by transferring half per cent. of each deposit to such fund;

7. keep the entire amount in the contingent fund referred to in sub-clause (vi) of this clause, in any nationalised bank;

8. in case of default in making refund of deposit to more than ten depositors, allow to monitor its working by a special officer appointed by the Central Government;

9. comply with the directions given by such special officer appointed under sub-clause (viii) of this clause;

10. allow special audit to be conducted by the auditors appointed by the Central Government and such auditors shall furnish to that Government-

1. a certificate regarding compliance of all the requirements specified in this notification;  

2. a certificate complying with the provisions of sub-section (4A) of section 227 of the Companies Act, 1956 (1 of 1956): 

2. The directions specified in sub-clauses (i) to (xxii) of clause (a) and sub-clauses (i) to (x) of clause (b) of this notification shall, as far as may be, apply to every company declared as a Nidhi or Mutual Benefit Society under section 620A of the said Act on or after the publication of this notification.

3. The Central Government if satisfied that the circumstances have arisen it is necessary in public interest and after recording the reasons in writing, may relax any of the directions for proper working of Nidhis or Mutual Benefit Societies.

R.D.JOSHI

Joint Secretary to the Government of India

[ File No._5/37/99-CL-V]