OBLIGATIONS OF NIDHI COMPANY IN ACCEPTING DEPOSITS AND GRANTING LOANS TO ITS MEMBERS

[Mr. M. GOVINDARAJAN]

About Nidhi

The object of the Nidhi company is to cultivate the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with the rules made by the Central Government for regulation of such class of companies.  A Nidhi company is to have not less than 200 members and net owned funds of Rs.20 lakhs or more.   A Nidhi shall be a public company and shall have a minimum paid up equity share capital of  Rs.10 lakhs.

Restrictions

Rule 6 imposes the restrictions on Nidhi.  Some of the restrictions are as below that the Nidhi shall-

• Not to open any current account with its members;
• Not to accept deposits from or lend to any person, other than its members;
• Not to pledge any of the assets lodged by its members as security;
• Not to take deposits from or lend money to anybody corporate.

Acceptance of deposits

A Nidhi shall not accept deposits exceeding twenty times of its Net Owned Funds (NOF) as per its last audited financial statements.  The Nidhi Company may accept savings deposit, fixed deposit and recurring deposit and other deposits.

Savings account

• The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed Rs. 1 lakh  at any point of time.
• The rate of interest shall not exceed 2% above the rate of interest payable on savings bank account by nationalized banks.

Recurring Deposit

•  Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period of 60 months.
• In case of recurring deposits relating to mortgage loans, the maximum period of recurring deposits shall correspond to the repayment period of such loans granted by Nidhi.
• A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding the maximum rate of interest prescribed by the Reserve Bank of India which the Non-Banking Financial Companies can pay on their public deposits.
• A recurring deposit account shall be foreclosed by the depositor subject to the following conditions, namely:-

• a Nidhi shall not repay any deposit within a period of 3 months from the date of its acceptance;
• where at the request of the depositor, a Nidhi repays any deposit after a period of 3 months, the depositor shall not be entitled to any interest up to 6 months from the date of deposit;

Fixed deposit

• The fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of 60 months.

• A recurring deposit account shall be foreclosed by the depositor subject to the following conditions, namely:-

• a Nidhi shall not repay any deposit within a period of 3 months from the date of its acceptance;
• where at the request of the depositor, a Nidhi repays any deposit after a period of 3 months, the depositor shall not be entitled to any interest up to 6 months from the date of deposit;

Repayment of deposit

Where at the request of the depositor, a Nidhi makes repayment of a deposit before the expiry of the period for which such deposit was accepted by Nidhi, the rate of interest payable by Nidhi on such deposit shall be reduced by 2% from the rate which Nidhi would have ordinarily paid, had the deposit been accepted for the period for which such deposit had run.

In the event of death of a depositor, the deposit may be repaid prematurely to the surviving depositor or depositors in the case of joint holding with survivor clause, or to the nominee or to legal heir with interest up to the date of repayment at the rate which the company would have ordinarily paid, had such deposit been accepted for the period for which such deposit had run.

Granting of loan

Rule 15 provides that a Nidhi company shall provide loans only to its members.  In case of joint shareholders, the loan shall be provided to the member whose name appears first in the Register of members.  The loans given by a Nidhi to a member shall be subject to the following limits-

• Rs. 2 lakhss, where the total amount of deposits of such Nidhi from its members is less than Rs. 2 crores.
• Rs.750000/-, where the total amount of deposits of such Nidhi from its members is more than two crore rupees but less than Rs.20 crores;
• Rs.12 lakhs, where the total amount of deposits of such Nidhi from its members is more than Rs.20 crores and
• Rs. 15 lakhs, where the total amount of deposits of such Nidhi from its members is more than Rs.50 crores.

Where a Nidhi has not made profits continuously in the 3 preceding financial years, it shall not make any fresh loans exceeding 50% of the maximum amounts of loans specified.   A member shall not be eligible for any further loan if he has borrowed any earlier loan from the Nidhi and has defaulted in repayment of such loan.

The amount of deposits shall be calculated on the basis of the last audited annual financial statements.

Gold loan

A Nidhi shall give loans to its members only against the gold, silver and jewellery.  The repayment period of such loan shall not exceed 1 year.

Loan on immovable property

The total loans against immovable property excluding mortgage loans granted on the security of property by registered mortgage, being a registered mortgage under section 69 of the Transfer of Property Act, 1882 shall not exceed 50% of the overall loan outstanding on the date of approval by the board, the individual loan shall not exceed 50% of the value of property offered as security and the period of repayment of such loan shall not exceed 7 years.

Loan on fixed deposits

Loans on fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies may be given to members.  Such securities duly discharged shall be pledged with Nidhi and the maturity date of such securities shall not fall beyond the loan period or 1 year whichever is earlier.  In the case of loan against fixed deposits, the period of loan shall not exceed the unexpired period of the fixed deposits.