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Richa Mishra

NEW DELHI, May 2

THE Department of Company Affairs (DCA) has notified fresh guidelines amending the existing norms for nidhis and mutual benefit societies (MBS) specifying a strict time-frame for the entire industry to ensure compliance with the norm of limiting their aggregate deposits to a mandated maximum of 20 times the net owned funds (NoF) of the deposit-raising entity.

As per the new schedule, companies with deposits up to 25 times of their NOF (capital plus free reserves) as on March 31, 2001 be given a time limit of March 31, 2004 to pull back deposits within the specified limit.

Further, companies with deposits from 26 to 40 times their NOF would be given another year's time up to March 31, 2005 while those with 41 to 80 times the NOF will have to fall in line by March 31, 2006. Such companies with deposits exceeding 80 times its NOF will be granted time up to March 31, 2007.

The new notification is broadly based on recommendations of an expert group headed by Mr A R Rao, former-Chairman, Income Tax Settlement Commission, set up to review the existing norms notified in 2001. DCA had been receiving representations from the nidhis and their chambers of commerce to review the existing norms.

Specifying details of what would be taken to constitute `net owned funds' the notification says that it would be "the aggregate of paid-up equity capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet of the company. A reserve shall be considered as a "free reserve'' if it is available for distribution as dividend.''

It also states that the amount representing the proceeds of issue of preference shares shall not be included for calculating NOF. However, for nidhis or mutual benefit society (MBS) existing on or before July 26, 2001, the proceeds of issue of preference shares shall be included for calculation of NOF up to to the financial year March 31, 2004.

The DCA has also specified a schedule for the nidhis to comply with the norm of maintaining 10 per cent of their deposits invested in unencumbered terms deposits with banks and regional rural bank under which the companies would have to maintain a minimum of 2 per cent of total deposits in such instruments by March 31, 2002, five per cent by March 31, 2003 and 10 per cent by March 31, 2004.

Temporary withdrawal from these investments shall be permitted with the prior approval of the regulatory authority for the purpose of repayment to depositors in cases of unforeseen commitments.

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