GOVERNMENT OF INDIA
MINISTRY OF LAW, JUSTICE AND COMPANY AFFAIRS
DEPARTMENT OF COMPANY AFFAIRS
NOTIFICATION
New Delhi, the 30th April, 2002
G.S.R 309 (E).- In exercise of the powers conferred by sub-section (1) of section 637 A of the Companies Act, 1956 ( 1 of 1956), and in supersession of Notification of the Government of India, Ministry of Law, Justice & Company Affairs (Department of Company Affairs) No GSR 556(E) dated 26.7.2001, except as respects things done or omitted to be done before such supersession, the Central Government hereby directs that-
Every company declared as a Nidhi or Mutual Benefit Society under section 620A of the Companies Act, 1956 (hereinafter referred to as such Nidhi or Mutual Benefit Society) after the publication of this Notification shall adhere to the following prudential norms for revenue recognition and classification of assets in respect of mortgage loans or jewel loans, namely:-
(i) income including interest or any other charges on non-performing assets shall be recognised only when it is actually realised. Any such income recognised before the asset became non-performing and remaining unrealised shall be reversed in the current year’s profit and loss account;
(ii) Classification of assets
(a) Mortgage Loan:
NATURE OF ASSET |
PROVISION REQUIRED |
Standard Asset |
No provision |
Sub-standard Asset |
10% of the aggregate outstanding amount |
Doubtful Asset |
25% of the aggregate outstanding amount |
Loss Asset |
100% of the aggregate outstanding amount |
Explanation: In this direction,-
(1) “Standard Asset” means the asset in respect of which no default in repayment of principal or payment of interest is perceived and which does not disclose any problem nor carry more than normal risk attached to the business;
(2) “Sub-Standard Asset” will be that borrowal account which is a non performing asset. Reschedulement or Renegotiation or Rephasement of the loan instalment or interest payment would not change the classification of assets unless the borrowal account has satisfactorily performed for at least 12 months after such reschedulement or renegotiation or rephasement;
(3) “Doubtful Asset” will be that borrowal account which remained non-performing for more than two years but up to three years;
(4) “Loss Asset” will be that borrowal account which remained non-performing for more than three years or where as per the opinion of the Nidhi or its internal auditor or by the inspecting authority during the course of its inspection a shortfall in the recovery of the loan account is expected because the documents executed may become invalid if subjected to legal process or for any other reason;
(5) “Non-Performing Asset” will be that borrowal account where interest income and/or instalment of loan towards repayment of principal amount remained unrealised for 12 months:
“provided that the Nidhi companies or Mutual Benefit Societies incorporated on or before 26.7.2001 shall adhere to the prudential norms as per table given below:
TABLE
| Mortgage loans given up to and outstanding as on | Compliance date i.e. date of the balance Sheet |
| (a) 31.3.2000 | 31.3.2005 |
| (b) 31.3.2001 | 31.3.2006 |
| ( c ) 31.3.2002 | 31.3.2007 |
(b) Loans against Jewellery, Government Securities or own deposits, etc.,
The aggregate outstanding amount of loan granted against the security of gold, jewellery etc., should be either recovered or renewed within next three months after the due date of repayment specified at the time of grant of such loans. If the loan is not recovered or the security is not sold within the given time, the company should make 100% provision against current year’s Profit and Loss Account to the extent of unrealised amount or aggregate outstanding amount of loan as applicable. No income shall be recognised on such loans outstanding after the expiry of three months period or sale of jewellery, whichever is earlier.
2. The above prudential norms for revenue recognition and classification of assets shall be applicable to all Nidhi companies or Mutual Benefit Societies notified under section 620 A of the Companies Act, 1956 before or after the publication of this notification.
3. The Central Government if satisfied that the circumstances have arisen and if found in public interest, after recording the reasons in writing, may relax any of the directions mentioned above either generally or for any specified period, subject to such terms and conditions, as that Government may specify, for avoiding any hardship to any Nidhi or any Mutual Benefit Society or class of Nidhis or class of Mutual Benefit Societies.
(Rajiv Mehrishi)
Joint Secretary
