No.5/37/99-Cl.V

Government of India

Ministry of Law, Justice & Company Affairs

Department of Company Affairs

 

5th Floor, A Wing, Shastri Bhavan,

New Delhi-, dated 2.11.99

 

PRESS NOTE No:14 /1999

 

 

Subject : Nidhi/Mutual Benefit Societies – Issue of notification regarding relating to functions of Nidhis/ norms Mutual Benefit Societies

 

Government of India has considered it necessary to consolidate and further rationalise all the norms relating to functioning of Nidhis with a view to reinforce confidence of small depositors in Nidhis particularly in the context of defaults in refund of deposits by few Nidhi Companies. Accordingly a Notification (No: GSR 737(E)) to this effect has been issued by this Department on 1.11.1999. Some of the key norms now made are as under:

i) All the recognised Nidhis will have a deposit cap of Rs.20 crores and once this limit is crossed a Nidhi will become an ordinary NBFC and will loose it Nidhi status under the Companies Act. Nidhi companies having deposit of over Rs.20 crores as on the date of publication of Notification No: GSR 737(E) (i.e. 1.11.1999) will not be allowed to increase the deposit beyond this limit and their deposit figures will be forzen and the bench mark of deposit as on the date of publication of Notification No: GSR 737(E) (i.e. 1.11.1999) will be a ceiling limit beyond which at no point of time Nidhi can invite further deposits.

ii) Nidhis which are having branches outside the State in which they are registered will be given three years time to shut down their branches outside the State.

iii) Similarly Nidhis having more than three branches in the State or within the District will be given five years’ time to bring them down to the ceiling of three branches over and above the registered headquarters.

iv) No Nidhi or Mutual Benefit Society will be allowed to enter into any arrangement for change of management without the approval of Department of Company Affairs/Reserve Bank of India.

v) No Nidhi can enter into any arrangement in the change of management without the approval of shareholders by a special resolution.

  1. Nidhi will not be allowed to accept deposit for a period of less than six months.

vii) DCA will have the right to appoint Special Officers to monitor the working of the Nidhis in case the default in repayment of deposits is alleged by more than 10 depositors. The directions given by the Special Officer will be binding on the Nidhis.

  1. Nidhis will not be allowed to give loans to Directors beyond Rs. 15 lakhs. If loans are given to directors beyond this limit Nidhis will recall such loans and bring it down to Rs.15 lakhs within a period of one year.

ix) If the auditors are found giving vague certificate relating to compliance with DCA norms/regulations, DCA will be authorised to order special audit and take suitable action against the auditors.

x) Each Nidhi will be required to maintain a contingency fund which will be built up by transferring 0.5% of each deposit to this fund which will be kept in deposit form with Nationalised Banks.

xi) The directors appointed to the Board of Nidhis can not hold the post beyond the period of 10 years. Such directors can be re-appointed only after a gap of two years.

 

2. A copy of this Press Note and relevant Notification (No: GSR 737(E) dated 1.11.1999 has been placed at the web page of DCA at Internet Address http://www.nic.in/dca.

 

 

( R.D. Joshi )

Joint Secretary to the Govt. of India