Nidhi Company: A Detailed Analysis

♦ Nidhi Company:

Nidhi Company is a form of NBFC, incorporated U/s. 406 of the Companies Act, 2013 and only public company U/r 4(1) can be declared as Nidhi Company. The Ministry of Corporate Affairs (MCA) is the body which governs Nidhi Company Rules and Regulations. Reserve Bank of India directs its deposit acceptance activities and issues new amendments for proper regulations. A Nidhi Company usually gets associated with the Benefit Funds, Permanent Fund, Mutual Benefit Company and Mutual Benefit Funds.

♦ Section 406 – Power to Modify Act in its Application to Nidhis:

(1) In this section, “Nidhi” or “Mutual Benefit Society” means a company which the CG may, by notification in the Official Gazette, declare to be a Nidhi or Mutual Benefit Society, as the case may be.

(2) The CG may, by notification in the Official Gazette, direct that any of the provisions of this Act specified in the notification:

√ shall not apply to any Nidhi or Mutual Benefit Society; or

√ shall apply to any Nidhi or Mutual Benefit Society with such exceptions, modifications and adaptations as may be specified in the notification.

(3) A copy of every notification proposed to be issued U/s. 406(2), shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days, and if, both Houses agree in disapproving the issue of notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by both the Houses

(4) In reckoning any such period of 30 days as is referred to in section 406(3), no account shall be taken of any period during which the House referred to in section 406(3) is prorogued or adjourned for more than 4 consecutive days

(5) The copies of every notification issued under this section shall, as soon as may be after it has been issued, be laid before each House of Parliament.

♦ Nidhi Company Rules and Regulations (Annual Compliances)

Every company registered U/s 406 of the Companies Act, 2013 must adhere to compliances, which are:

• Form NDH-1: It entails the Return of Statutory Compliances. If your incorporated company fulfills all the conditions of Nidhi Rules 2014, then you must file Form NDH-1 with the prescribed fees. Also, ensure to file it within 90 days from the closure of the first financial year. The form has to duly certified by a CA or a CS or CMA in practice.
• Form NDH-2: This form is filed for the extension of time, within 30 days from the closure of the first financial year. For that the company has to apply to the Regional Director (R.D.) with the specified fee under Nidhi Rules, 2014. Thereby the Regional Director will examine the application and pass orders within 30 days of the arrival of application. You have to fill this form only when your company fails to meet the compliances of:

√ Maintaining a minimum of 200 members within one year of incorporation, and

√ Not maintaining the NOF to deposit ratio of 1:20.

• Form NDH-3: This form is filed with the Registrar of Companies (ROC) within 30 days from the completion of each half-year along with the prescribed fees. Additionally, the form has to be duly certified by a practicing CA or CS or CMA.
• Form NDH-4: A new application Form NDH-4 has been introduced for those companies, which wish to get the status of Nidhi by the way of insertion of a new rule 3A. On receiving an application of a public company under Form NDH-4 along with the prescribed fees, if fully convinced that the company has complied with all the requirements under these Rules, the CG may declare the company as a Nidhi company in the O.G.

♦ Rule 2 – Application:

These rules shall apply to:

(a) every company which had been declared as a Nidhi or Mutual Benefit Society (MBS) U/s. 620A(1) of the Companies Act, 1956;

(b) every company functioning on the lines of a Nidhi company or MBS but has either not applied for or has applied for and is awaiting notification to be a Nidhi or MBS U/s. 620A(1) of the Companies Act, 1956; and

(c) every company incorporated as a Nidhi pursuant to the provisions of section 406 of the Act.

(d) every company declared as Nidhi or MBS U/s. 406(1) of the Act.

♦ Rule 3 – Definitions:

(1) In these rules, unless the context otherwise requires:

(a) “Act” means the Companies Act, 2013;

(b) “Doubtful Asset” means a borrowal account which has remained a nonperforming asset:

• for more than 2 years but less than 3 years;

(c) “Loss Asset” means a borrowal account which has remained a non-performing asset:

• for more than 3 years or
• where in the opinion of the Board,

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;

(d) “Net Owned Funds (NOF)” means:

• the aggregate of paid up equity share capital and free reserves
• as reduced by accumulated losses and intangible assets
• appearing in the last audited balance sheet:

Provided that the amount representing:

• proceeds of issue of preference shares shall not be included for calculating NOF

(da) “Nidhi” means:

• a company which has been incorporated as a nidhi
• with the object of cultivating the habit of thrift and saving 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 CG for regulation of such class of companies.

(e) “Non-Performing Asset” means:

• a borrower account in respect of which
• interest income or installment of loan
• towards repayment of principal amount
• has remained unrealized for 12 months;

(f) “Standard Asset” means the asset in respect of which no default in repayment of principal or payment of interest has occurred or is perceived and which has neither shown signs of any problem relating to repayment of principal sum or interest nor does it carry more than normal risk attached to the business;

(g) “Sub-Standard Asset” means a borrower account which is a non performing asset:

Provided that reschedulement or renegotiation or rephasement:

• of the loan installment or
• interest payment shall not change the classification of an asset
• unless the borrower account has satisfactorily performed
• for at least 12 months
• after such reschedulement or renegotiation or rephasement

♦ Rule 3A – Declaration of Nidhis:

The CG, on receipt of application (in Form NDH-4 along with fee thereon),

• of a public company for declaring it as Nidhi and
• on being satisfied that the company meets the requirements under these rules,
• shall notify the company as a Nidhi in the official Gazette:

Provided that a Nidhi incorporated under the Act on or after the commencement of the Nidhi (Amendment) Rules, 2019,

• shall file Form NDH-4 within 60 days from the date of expiry of:

(a) 1 year from the DOI or

(b) the period up to which extension of time has been granted by the Regional Director U/r. 5(3):

Provided further that nothing in the first proviso shall prevent a Nidhi from filing Form NDH-4 before the period referred therein:

Provided also that that in case a company does not comply with the requirements of this rule, it shall not be allowed to file:

• Form No. SH-7 (Notice to Registrar of any alteration of share capital) and
• Form PAS-3 (Return of Allotment)

♦ Rule 4 – Incorporation and Incidental Matters:

(1) A Nidhi shall be:

• a public company and
• shall have a minimum paid up equity share capital of Rs.5 lakh.

(2) On and after the commencement of the Act, no Nidhi shall issue preference shares.

(3) If preference shares had been issued by a Nidhi before the commencement of this Act,

• such preference shares shall be redeemed in accordance with the terms of issue of such shares.

(4) Except as provided under the proviso to rule 6(e), no Nidhi shall have any object in its Memorandum of Association other than:

• the object of cultivating the habit of thrift and savings amongst its members,
• receiving deposits from, and lending to, its members only,
• for their mutual benefit.

(5) Every “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.

♦ Rule 5 – Requirements for Minimum Number of Members, NOF, etc.:

(1) Every Nidhi shall, within a period of 1 year from the DOI, ensure that it has:

(a) Minimum 200 members;

(b) NOF’s of Rs. 10,00,000/- or more;

(c) unencumbered term deposits of Minimum: 10% of the outstanding deposits as specified in rule 14; and

(d) ratio of NOF to deposits of Maximum – 1:20.

(2) Within 90 days from the close of the first financial year after its incorporation and where applicable, the second financial year,

• Nidhi shall file a return of statutory compliances in Form NDH-1 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 with the Registrar duly certified by a CS in practice or a CA in practice or a CMA in practice.

(3) If a Nidhi is not complying with rule 5(1) (a) or (d) above,

• it shall within 30 days from the close of the first financial year,
• apply to the Regional Director in Form NDH-2 along with fee specified in Companies (Registration Offices and Fees) Rules, 2014
• for extension of time and
• the Regional Director (RD) may consider the application and
• pass orders within 30 days of receipt of the application.

Provided that the Regional Director may extend the period upto 1 year from the date of receipt of application

Explanation:  For the purpose of this rule “Regional Director” means the person appointed by the CG in the MCA as a RD;

(4) If the failure to comply with rule 5(1) of this rule extends:

• beyond the second financial year,
• Nidhi shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions contained in rule 5(1) and
• gets itself declared U/s. 406(1), besides being liable for penal consequences as provided in the Act.

♦ Rule 6 – General Restrictions or Prohibitions:

No Nidhi shall:

(a) carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by anybody corporate;

(b) issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever

(c) open any current account with its members;

(d) acquire another company:

• by purchase of securities or
• control the composition of the BOD of any other company in any manner whatsoever or
• enter into any arrangement for the change of its management,
• unless it has passed a special resolution in its general meeting and
• also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi;

Explanation: For the purposes of this rule 6, “control” shall have the same meaning assigned to it in section 2(27) of the Act;

(e) carry on any business other than the business of borrowing or lending in its own name:

Provided that Nidhis which have adhered to all the provisions of these rules may provide:

• locker facilities on rent to its members subject to the rental income from such facilities
• not exceeding 20% of the gross income of the Nidhi
• at any point of time during a financial year.

(f) accept deposits from or lend to any person, other than its members;

(g) pledge any of the assets lodged by its members as security;

(h) take deposits from or lend money to anybody corporate;

(i) enter into any partnership arrangement in its borrowing or lending activities;

(j) issue or cause to be issued any advertisement in any form for soliciting deposit:

Provided that private circulation of the details of fixed deposit schemes among the members of the Nidhi carrying the words “for private circulation to members only” shall not be considered to be an advertisement for soliciting deposits.

(k) pay any brokerage or incentive for mobilising deposits from members or for deployment of funds or for granting loans.

♦ Rule 7 – Share Capital and Allotment:

(1) Every Nidhi shall issue fully paid up equity shares of the nominal value of not less than Rs. 10/-each:

Provided that this requirement shall not apply to a company referred to in rule 2 (a) and (b).

(2) No service charge shall be levied for issue of shares.

(3) Every Nidhi shall allot to each deposit holder at least a minimum of 10 equity shares or shares equivalent to Rs. 100/-:

Provided that a savings account holder and a recurring deposit account holder shall hold Minimum one equity share of Rs. 10/-.

♦ Rule 8 – Membership:

(1) A Nidhi shall not admit a body corporate or trust as a member.

(2) Except as otherwise permitted under these rules, every Nidhi shall ensure that its membership is not reduced to less than 200 members at any time.

(3) A minor shall not be admitted as a member of Nidhi:

Provided that deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.

♦ Rule 9 – Net Owned Funds:

Every Nidhi shall maintain NOF’s (excluding the proceeds of any preference share capital) of Minimum Rs. 10,00,000/- or such higher amount as the CG may specify from time to time.

♦ Rule 10 – Branches:

(1) A Nidhi may open branches, only if it has earned net PAT continuously during the preceding 3 financial years.

(2) Subject to the provisions contained in rule 10(1), a Nidhi may open up to 3 branches within the district.

(3) If a Nidhi proposes to open more than 3 branches within the district or any branch outside the district,

• it shall obtain the prior permission of the Regional Director and
• an intimation is to be given to the Registrar about opening of every branch
• within 30 days of such opening.

(4) No Nidhi shall open branches or collection centres or offices or deposit centres, or by whatever name called,

• outside the State where its registered office is situated.

(5) No Nidhi shall open branches or collection centres or offices or deposit centres, or by whatever name called,

• unless financial statement and annual return (up to date) are filed with the Registrar.

(6) A Nidhi shall not close any branch unless it-

(a) publishes an advertisement in a newspaper in vernacular language,

• in the place where it carries on business
• at least 30 days prior to such closure,
• informing the public about such closure;

(b) fixes a copy of such advertisement or a notice informing such closure of the branch on the notice board of Nidhi

• for a period of at least 30 days from the date on which advertisement was published under clause (a) ; and

(c) gives an intimation to the Registrar within 30 days of such closure.

♦ Rule 11 – Acceptance of Deposits by Nidhis:

(1) A Nidhi shall not accept deposits exceeding 20 times of its NOF’s as per its last audited financial statements.

(2) In the case of companies covered  U/r 2 (a) and (b) and existing on or before 26th July, 2001 and which have accepted deposits in excess of the aforesaid limits, the same shall be restored to the prescribed limit by increasing the NOF’s position or alternatively by reducing the deposit according to the table given below:

SL.No.	Ratio of NOF’s to Deposits (as on 31.3. 2013)	Date by which the company has to achieve prescribed ceiling of 1:20
a.	More than 1:20 but upto 1:35	By 31.3. 2015
b.	More than 1:35 but upto 1:45	By 31.3. 2016
c.	More than 1:45	By 31.3. 2017

(3) The companies which are covered under the Table in rule 11(2) above:

• shall not accept fresh deposits or
• renew existing deposits
• if such acceptance or renewal leads to violation of the prescribed ratio.

(4) The ratio specified in rule 11(2) above shall also apply to incremental deposits.

♦ Rule 12 – Application Form for Deposit:

(1) Every application form for placing a deposit with a Nidhi shall contain the following particulars, namely:-

(a) Name of Nidhi;

(b) Date of incorporation of Nidhi;

(ba) The date of declaration or notification as Nidhi

(c) The business carried on by Nidhi with details of branches, if any;

(d) Brief particulars of the management of Nidhi (name, addresses and occupation of the directors, including DIN);

(e) Net profits of Nidhi before and after making provision for tax for the preceding three financial years;

(f) Dividend declared by Nidhi during the preceding three financial years;

(g) Mode of repayment of the deposit;

(h) Maturity period of the deposit;

(i) Interest payable on the deposit;

(j) The rate of interest payable to the depositor in case the depositor withdraws the deposit prematurely;

(k) The terms and conditions subject to which the deposit may be accepted or renewed;

(l) A summary of the financials of the company as per the latest two audited financial statements as given below:

(i) NOF’s

(ii) Deposits accepted

(iii) Deposits repaid

(iv) Deposits claimed but remaining unpaid

(v) Loans disbursed against:

√ immovable property;

√ deposits; and

√ gold and jewellery

(vi) Profit before tax

(vii) Provision for tax

(viii) Profit after tax

(ix) Dividend per share

(m) any other special features or terms and conditions subject to which the deposit is accepted or renewed.

(2) The application form shall also contain the following statements, namely:-

(a) in case of non-payment of the deposit or part thereof as per the terms and conditions of such deposit,

• the depositor may approach the Bench of the National Company law Tribunal having jurisdiction over Nidhi;

(b) in case of any deficiency of Nidhi in servicing its depositors,

• the depositor may approach the National Consumers Disputes Redressal Forum, the State Consumers Disputes Redressal Forum or District Consumers Disputes Redressal Forum, as the case may be, for redressal of his relief;

(c) a declaration by the Board of Directors to the effect that the financial position of Nidhi as disclosed and the representations made in the application form are true and correct and that Nidhi has complied with all the applicable rules;

(d) a statement to the effect that the CG does not undertake any responsibility for the financial soundness of Nidhi or for the correctness of any of the statement or the representations made or opinions expressed by Nidhi;

(e) the deposits accepted by Nidhi are not insured and the repayment of deposits is not guaranteed by either the CG or the Reserve Bank of India; and

(f) a verification clause by the depositor stating that he had read and understood the financial and other particulars furnished and representations made by Nidhi in his application form and after careful consideration he is making the deposit with Nidhi at his own risk and volition.

(3) Every Nidhi shall obtain proper introduction of new depositors before opening their accounts or accepting their deposits and keep on its record the evidence on which it has relied upon for the purpose of such introduction.

(4) For the purposes of introduction of depositors, a Nidhi shall obtain documentary evidence of the depositor in the form of proof of identity and address as under:

(a) Proof of Identity (any one of the following):

√ Passport

√ Unique Identification Number

√ Income-tax PAN card

√ Elector Photo Identity Card

√ Driving licence

√ Ration card

(b) Proof of address (any one of the following):

√ Passport

√ Unique Identification Number

√ Elector Photo Identity Card

√ Driving licence

√ Ration card

√ Telephone bill

√ Bank account statement

√ Electricity bill

(documents referred to serial numbers (vi), (vii) and (viii) above shall not be more than two months old)

♦ Rule 13 – Deposits:

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

(2) Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period of 60 months.

(3) 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.

(4) The maximum balance in a savings deposit account at any given time qualifying for interest:

• shall not exceed Rs. 1,00,000/- at any point of time and
• the rate of interest shall not exceed 2% above the rate of interest payable
• on savings bank account by nationalised banks.

(5) 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 NBFC’s can pay on their public deposits.

(6) A fixed deposit account or a recurring deposit account shall be foreclosed by the depositor subject to the following conditions, namely:-

(a) a Nidhi shall not repay any deposit within a period of 3 months from the date of its acceptance;

(b) 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;

(c) 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:

Provided that 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.

♦ Rule 14 – Un-encumbered Term Deposits:

Every Nidhi shall invest and continue to keep invested,

• in unencumbered term deposits with a scheduled commercial bank (other than a co-operative bank or a regional rural bank), or
• post office deposits in its own name an amount
• which shall not be less than 10% of the deposits outstanding at the close of business on the last working day of the second preceding month:

Provided that in cases of unforeseen commitments,

• temporary withdrawal may be permitted
• with the prior approval of the Regional Director for the purpose of repayment to depositors,
• subject to such conditions and time limit which may be specified by the Regional Director
• to ensure restoration of the prescribed limit of 10%.

♦ Rule 15 – Loans:

(1) A Nidhi shall provide loans only to its members.

(2) The loans given by a Nidhi to a member shall be subject to the following limits, namely:-

(a) Rs. 2 lakh, where the total amount of deposits of such Nidhi from its members is less than Rs. 2 crore;

(b) Rs. 7.5 lakh, where the total amount of deposits of such Nidhi from its members is more than Rs. 2 crore but less than Rs. 20 crore;

(c) Rs. 12 lakh, where the total amount of deposits of such Nidhi from its members is more than Rs. 20 crore but less than Rs. 50 crore; and

(d) Rs. 15 lakh, where the total amount of deposits of such Nidhi from its members is more than Rs. 50 crore:

Provided that 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 in clauses (a), (b), (c) or (d).

Provided further that 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

(3) For the purposes of rule15(2), the amount of deposits shall be calculated on the basis of the last audited annual financial statements.

(4) A Nidhi shall give loans to its members only against the following securities, namely:-

(a) gold, silver and jewellery:

Provided that the repayment period of such loan shall not exceed 1 year

(b) immovable property:

Provided that the total loans against immovable property [excluding mortgage loans granted on the security of property by registered mortgage,

• being a registered mortgage U/s. 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.

(c) fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies:

Provided that 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:

Provided further that in the case of loan against fixed deposits,

• the period of loan shall not exceed the unexpired period of the fixed deposits

♦ Rule 16 – Rate of Interest:

The rate of interest to be charged on any loan given by a Nidhi shall:

• not exceed 7 ½ % above the highest rate of interest offered on deposits by Nidhi and
• calculated on reducing balance method:

Provided that Nidhi shall charge the same rate of interest on the borrowers,

• in respect of the same class of loans and
• the rates of interest of all classes of loans
• shall be prominently displayed on the notice board at the registered office and each branch office of Nidhi.

♦ Rule 17 – Rules Relating to Directors:

(1) The Director shall be a member of Nidhi.

(2) The Director of a Nidhi shall hold office for a term up to 10 consecutive years on the Board of Nidhi.

(3) The Director shall be eligible for re-appointment only after the expiration of 2 years of ceasing to be a Director.

(4) Where the tenure of any Director in any case had already been extended by the CG, it shall terminate on expiry of such extended tenure.

(5) The person to be appointed as a Director shall comply with the requirements of section 152(4) of the Act and shall not have been disqualified from appointment as provided in section 164 of the Act.

♦ Rule 18 – Dividend:

A Nidhi shall not declare dividend:

• exceeding 25% or
• such higher amount
• as may be specifically approved by the Regional Director

for reasons to be recorded in writing and further subject to the following conditions, namely:

√ an equal amount is transferred to General Reserve;

√ there has been no default in repayment of matured deposits and interest; and

√ it has complied with all the rules as applicable to Nidhis.

♦ Rule 19 – Auditor:

• No Nidhi shall appoint or re-appoint an individual as auditor for more than 1 term of 5 consecutive years.
• No Nidhi shall appoint or re-appoint an audit firm as auditor for more than 2 terms of 5 consecutive years;

Provided that an auditor (whether an individual or an audit firm):

• shall be eligible for subsequent appointment
• after the expiration of 2 years from the completion of his or its term.

Explanation: For the purposes of this proviso:

• in case of an auditor (whether an individual or audit firm),
  • the period for which he or it has been holding office as auditor
  • prior to the commencement of these rules
  • shall be taken into account
  • in calculating the period of five consecutive years or ten consecutive years, as the case may be;

√ appointment includes re-appointment

♦ Rule 20 – Prudential Norms:

(1) Every Nidhi shall adhere to,

• the prudential norms for revenue recognition and
• classification of assets in respect of mortgage loans or jewel loans as contained hereunder.

(2) Income including interest or any other charges on non-performing assets,

• shall be recognised only when it is actually realised and
• any such income recognised before the asset became non-performing and
• which remains unrealised in a year
• shall be reversed in the profit and loss account of the immediately succeeding year.

(3) (a) In respect of mortgage loans, the classification of assets and the provisioning required shall be as under:

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

Provided that a Nidhi may make provision for exceeding the percentage specific herein

(b) The estimated realisable value of the collateral security to which a Nidhi has valid recourse,

• may be reduced from the aggregate outstanding amount,
• if the proceedings for the sale of the mortgaged property
• have been initiated in a court of law
• within the previous 2 years of the interest, income or instalment remaining unrealised.

(4) In case of companies which were incorporated on or before 26-07-2001, such companies shall make provisions in respect of loans disbursed and outstanding as on 31-03-2002 for income reversal and non-performing assets as per table given below:

For the year ended	Extent of provision
31-03- 2015 31-03- 2016 31-03- 2017	Un-provided balance on equal basis over the 3 years as specified in the preceding column.

(5) (a) The Notes on the financial statements of a year shall disclose:

√ the total amount of provisions, if any, to be made on account of income reversal and non-performing assets remaining unrealised;

√ the cumulative amount provided till the previous year;

√ the amount provided in the current year; and

√ the balance amount to be provided.

(b) Such disclosure shall continue to be made until the entire amount to be provided has been provided for.

(6) In respect of loans against gold or jewellery-

√ the aggregate amount of loan outstanding against the security of gold or jewellery shall,

• • either be recovered or renewed within 3 months from the due date of repayment;

√ if the loan is not recovered or renewed and the security is not sold within the aforesaid period of 3 months,

• • the company shall make provision in the current year’s financial statements to the extent of unrealised amount or
  • the aggregate outstanding amount of loan including interest as applicable;

√ no income shall be recognised on such loans outstanding

• • after the expiry of the 3 months period specified in (a) above or
  • sale of gold or jewellery,
  • whichever is earlier; and

√ the loan to value ratio shall not exceed 80 percent.

Explanation: For the purposes of this rule, the term ‘loan to value ratio’ means:

• the ratio between the amount of loan given and the value of gold or jewellery against which such loan is given.

♦ Rule 21 – Filing of Half Yearly Return:

Every company covered U/r 2:

• shall file half yearly return with the Registrar
• in Form NDH-3 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014
• within 30 days from the conclusion of each half year duly certified by a CS in practice or CA in practice or CMA in practice.

♦ Rule 22 – Auditor’s Certificate:

The Auditor of the company shall furnish a certificate:

• every year to the effect that the company has complied with all the provisions contained in the rules and
• such certificate shall be annexed to the audit report and
• in case of non-compliance, he shall specifically state the rules which have not been complied with.

♦ Rule 23 – Power to Enforce Compliance:

(1) For the purposes of enforcing compliance with these rules,

• ROC may call for such information or returns from Nidhi as he deems necessary and
• may engage the services of CA, CS in practice, CMA, or any firm thereof from time to time for assisting him in the discharge of his duties.

(2) In respect of any Nidhi

• which has violated these rules or
• has failed to function in terms of the MOA and AOA,

the CG may appoint a Special Officer to take over the management of Nidhi and such Special Officer shall function as per the guidelines given by CG:

Provided that an opportunity of being heard shall be given to the concerned Nidhi by the CG before appointing any Special Officer

♦ Rule 23A – Compliance with rule 3A by certain Nidhis:

• Every company referred to in rule 2(b) and
• every Nidhi incorporated under the Act, before the commencement of Nidhi (Amendment) Rules, 2019, shall also get itself declared as such in accordance with rule 3A within a period of 1 year from the date of its incorporation or
• within a period of 9 months from the date of commencement of Nidhi (Amendment) Rules, 2019, whichever is later:

Provided that in case a company does not comply with the requirements of this rule, it shall not be allowed to file Form No. SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of Allotment)

♦ Rule 23B – Companies declared as Nidhis under previous company law to file Form NDH-4:

Every company referred in rule 2(a) shall file Form NDH-4 along with fees as per the Companies (Registration Offices and Fees) Rules, 2014 for updating its status:

Provided that no fees shall be charged under this rule for filing Form NDH-4, in case it is filed within 9 months of the commencement of Nidhi (Amendment) Rules, 2019:

Provided further that, in case a company does not comply with the requirements of this rule, it shall not be allowed to file Form No.SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of Allotment)

♦ Rule 24 – Penalty for Non-compliance:

If a company falling U/r 2 contravenes any of the provisions of the rules prescribed herein, the company and every officer of the company who is in default shall be punishable with fine:

• Maximum: Rs. 5,000/-, and
• where the contravention is a continuing one,
• with a Further Fine – Maximum: Rs. 500/- for every day after the first during which the contravention continues.

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