PRUDENTIAL NORMS FOR NIDHI COMPANIES REVISED
The
Government in the Department of
Company Affairs (DCA) has issued a notification modifying its
earlier notification of July 26, 2001 to fix prudential norms
for revenue recognition and classification of assets in respect
of mortgage loans or jewel loans of Nidhi companies or Mutual
Benefit Society with immediate effect. The DCA has also issued
another notification revising its earlier notification of July
26, 2001 rationalizing further the norms and standards fixed for
Nidhi or Mutual Benefit Society under Section 620A of the Companies
Act, 1956. Both the notifications have been issued under sub-section
(1) of Section 637A of the Companies Act, 1956.
No
provision is required for standard asset for mortgage loan.
Ten per cent of the aggregate outstanding amount has been fixed
for sub-standard asset, 25 per cent of the aggregate outstanding
amount for doubtful asset and 100 per cent of the aggregate for
loss asset. The notification has defined standard asset, sub-standard
asset, doubtful asset, loss asset and non-performing asset.
For
mortgage loans given upto and outstanding as on March 31,
2000, compliance date that is date of the balance sheet has been
fixed as on March 31, 2005 and for mortgage loans given upto and
outstanding as on March 31, 2001, the compliance date of the balance
sheet has been fixed at March 31, 2006 and for mortgage loans
given upto March 31, 2002 the compliance date will be March 31,
2007. The notification also explains the norms for loans against
jewellery, Government Securities or own deposits.
The
new prudential norms for revenue recognition and classification
of assets will be applicable to all Nidhi companies or Mutual
Benefit Societies before or after the publication of this notification.
The Central Government, however, shall modify the prudential norms
in special cases.
The other
notification provides for do's and don'ts and has addressed the
concerns of the Nidhi companies and is based on a recent committee
recommendations. It has defined Net Owned Funds as aggregate of
paid up equity capital and free reserves as reduced by accumulated
losses and intangible assets in the last audited balance sheet
of the company. It provides for achieving prescribed ceiling of
1:20 of ratio of Net Owned Fund to deposits as on March 31, 2001.
Accordingly, it will be by March 31,
2004, ratio of Net Owned Fund to deposits by more than 1:20 but
upto 1:25 by March 31, 2005, for more than 1:25 but upto 1:40
by March 31, 2006, for more than 1:40 but upto 1:80 and by March
31, 2007 for more than 1:80 and above. It has fixed prescribed
limit of 10 per cent of the total deposits achievable progressively.
Accordingly, 2 per cent of the total deposits will be achieved
by March 31, 2002, 5 per cent of total deposits by March 31, 2003
and 10 per cent of the total deposits by March 31, 2004. It has
also fixed loans against immovable property not exceeding 50 per
cent of the overall loan outstanding on the date of approval by
the Board and the individual loan. It shall not exceed 50 per
cent of the value of property offered as security. The period
of such loan will not exceed seven years. It
has further fixed periodicity of loan
against fixed deposits not exceeding the remainder period of fixed
deposits.
