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Money > Business Headlines > Report May 11, 2002 | 1135 IST |
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Mutual benefit society, nidhi norms alteredBS Economy Bureau The government on Friday modified prudential norms for revenue recognition and asset classification for mortgage and jewel loans of nidhi companies or mutual benefit societies. While no provision is required for standard assets of mortgage loans, the Department of Company Affairs notified that MBS would be required to provide for 10 per cent of the aggregate outstanding amount for sub-standard assets, 25 per cent for doubtful assets and 100 per cent of the aggregate for loss assets. The notifications also explain norms for loans against jewellery, government securities and own deposits. Loans against immovable property cannot exceed 50 per cent of a nidhi company's overall outstanding loans on the date of approval by the board. Also, the loan cannot exceed 50 per cent of the value of property offered as security. The tenure of the loan cannot exceed seven years and the periodicity of loan against fixed assets cannot exceed the remainder period of fixed deposits. An official release added that the prudential norms will be applicable to all nidhi companies though the Centre can modify the norms in special cases. The DCA has issued another notification -- revising its notification of July 26, 2001 -- to further rationalise norms fixed for nidhi companies or MBS under Section 620 A of the Companies Act, 1956. Both the notifications have been issued under Section 637 of the Companies Act, an official statement said. Based on the recent recommendations of the expert committee on MBS, the notification also draws up a list of 'dos' and 'don'ts' for nidhi companies. It has defined net owned funds as the aggregate of paid up equity capital and free reserves as reduced by accumulated losses and intangible assets in the last audited balance sheet of the company. DCA has also stipulated that MBS would have to reach the prescribed 1:20 ratio of net owned funds to deposits as on March 31, 2001, which then increases progressively to touch 1:80 by the end of March 2006 and over 1:80 by the end of March 2007. ALSO READ:
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