The Hindu Business Line : `Nidhi cos must put in place self-regulation mechanism'

Nidhi companies must put in place a self-regulation mechanism and disclose all performance details, according to Mr R. Anand, Member of the expert group on nidhis.

Addressing a meeting organised by the Chamber of Nidhis on Friday, he said nidhis should also disclose their debt as part of their balance sheet. Nidhi companies were accountable not only to shareholders but to all stakeholders, he said.

As part of the self-regulation, he said that nidhis could publish their results every quarter. Asking them to offer strong asset protection to depositors, Mr Anand said transparency and good accounting practices would help make the industry professional. "If tight accounting models are accepted we can expect FDI in nidhis as in other industries," he said.

Mr E. Selvaraj, Joint Director (Legal), Ministry of Company Affairs (MCA), and member of the Chamber of Nidhis and Chamber of Benefit Funds, said the MCA was working towards excluding the classification of nidhis as part of other non-banking finance companies (NBFC). This will ensure that nidhis will be treated a separate entity regulated by the MCA alone and not the RBI and MCA as is the case now.

He urged companies to reallocate their lending portfolio. At present, about 90 per cent of lending is towards mortgage and the rest towards jewel loans. Recent notifications to the MCA say this ratio must be 50: 50. The expert group had recommended that the interest rate spread (between deposits and advances) be brought down from 7.5 per cent to 5 per cent. The nidhis asked the expert group to revert to the old rates or alternately devise a mechanism to gradually bring this into force. Other issues discussed by representatives from nidhi companies included tax exemption on fixed deposits with term of over five years (as is the case with banks today).