The government has noticed serious violations by leading nidhi companies that provide mortgage loans to a large number of people in south India.
The company affairs ministry, which recently scrutinised the returns filed by all the nidhi companies, have found that the top 10 nidhi companies based in Tamil Nadu have not been complying with the prudential norms.
As per prudential norms notified by the ministry in 02, these companies are required to maintain certain statutory ratios. The norms restrict the quantum of deposits nidhi can accept to 20 times their own funds, which comprises membership fee they collect and the value of the land and the property they own.
Nidhi companies lend to their members on the basis of collateral and the cap on deposits aims at restricting their operations to a multiple of the assets so that its business does not go out of hand. The other major violation is not providing for non-performing assets in their accounts, sources said.
Company affairs minister Prem Chand Gupta has asked the regional Registrar of Companies to inspect the offices of the top ten companies and make case for prosecution. The government expects that the inspections could reveal siphoning off of funds. The idea is to protect the interests small investors.
Prem Chand Gupta said the ministry is planning various other measures to protect their interest using the Investor Education and Protection Fund (IEPF) too. The ministry had stated from time to time that it is very concerned about nidhi companies deployment of funds, possible embezzlement and the non-maintenance of statutory ratios.
The ministry is also in the process of reforming the regulatory regime governing nidhi companies based on the AR Rao committee report. Recently, it has notified two amendments towards this goal.