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Monday, Feb 11, 2002

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Panel likely to review nidhi norms

Richa Mishra

NEW DELHI, Feb. 10

THE Government is actively considering constituting an expert committee to examine the issues raised on the prescribed norms notified by the Department of Company Affairs (DCA) for the nidhis or mutual benefit societies (MBS).

In August last year, DCA had issued two notifications introducing stringent norms for MBS or nidhis with immediate effect. The two notifications superseded the earlier notifications of November 1, 1999, November 19, 1999 and April 25, 2000.

"The department proposes to have a time limit for the expert committee to submit its report," sources said, adding that "the purpose behind setting up of the committee is to bring about the changes after due consideration."

According to sources, nidhi companies and their chambers raised about 21 issues. The companies and their chambers expressed concerns on the restriction prescribed in the notification that a nidhi or MBS shall not issue any equity share of nominal value less than Rs 10.

Besides, they raised concern on prudential norms for revenue recognition and classification of assets in respect of mortgage loans and jewel loans, etc., specified by the department through a separate notification.

The committee will also be looking into the specifications of the notification that prescribes that the nidhis will ensure that its net owned fund (excluding the proceeds of preference share capital) is not less than Rs 10 lakh or such amount as the Union Government may specify from time to time. According to the notification, the existing nidhis shall reach the minimum amount of Rs 10 lakh before December 31, 2002.

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