Government notifies prudent norms for Nidhi companies

New Delhi, Aug 3: Government has notified stringent prudential rules for Nidhi companies, a special category of non-banking finance companies, in line with the Sabanayagam committee report.

The government for the first time brought in prudential guidelines for Nidhi companies concerning all matters pertaining to functioning and dynamics of the companies. “Apart from bringing about systematic changes like limits up to which Nidhi companies mobilise deposits, the rules also specify the net-owned funds limit, compulsory investment in scheduled commercial banks, ensuring adequate financial information to depositors and members, restrictions regarding opening of branches, continuity of directorship beyond 10 years, etc,” an official release said.

The Sabanayagam committee, which submitted its report to government in September 2000, suggested stringent norms for Nidhi companies after consultation with Reserve Bank of India.

The committee, under the chairmanship of P Sabanayagam, was appointed by the government in March 2000 after a series of default in payment of deposits by Nidhi companies on account of lack of regulatory guidelines.

-- PTI