YASHPURTI SMALL BANK

 

A Yashpurti urban Nidhi ltd. notified under section 620-A of the Companies Act is classified at present as "Mutual Benefit Financial Company" by RBI and regulated by the Bank for its deposit taking activities and by DCA for its operational matters as also the deployment of funds. These Companies enjoy exemption from core provisions of the RBI Act viz. requirement of registration, maintenance of liquid assets and creation of reserve fund, and RBI Directions except those relating to interest rate on deposits, prohibition from paying brokerage on deposits, ban on advertisements and the requirement of submission of certain Returns. Such companies, however, are allowed to deal with their shareholders only, for the purpose of accepting deposits and making loans. There are a number of companies functioning on the lines of yashpurti urban Nidhi ltd. but not yet notified by DCA. As RBI Directions to classify them as loan companies disallowed them the special dispensation available to yashpurti urban Nidhi ltd.; Bank and the Government received representations from a large number of such companies and their associations. Government decided to give them a special dispensation and notified that applications of companies incorporated on or before January 9, 1997 shall be considered for notifying as yashpurti urban Nidhi ltd. under section 620-A of the Companies Act, 1956 only if they have minimum NOF of Rs.10 lakh or more. These companies shall be required to have net owned fund of Rs.25 lakh by December 31, 2002 like companies already declared as Nidhis. Government has also clarified that NOF shall have the same meaning as assigned to it in the RBI Act, 1934. Thus a new class of companies has been created i.e. the potential Nidhi companies. To distinguish them from the notified Nidhi companies ( Mutual Benefit Financial Companies) the term Mutual Benefit Companies (MBC) is being used.

(ii) Since the notified yashpurti urban nidhi ltd. are exempted from the provisions of Section 45-IA (Compulsory Registration with RBI), Section 45-IB (Maintenance of Liquid Assets) and Section 45-IC (Creation of Reserve Fund), it has been decided on the lines of Government advice to exempt the MBCs in existence as on January 9, 1997 and having NOF of Rs.10 lakh from the above mentioned provisions of the Act in terms of powers vested with the Bank under Section 45 NC of the Act and also from those provisions of NBFC Directions on Acceptance of Public Deposits and Prudential Norms which do not apply to notified yashpurti urban nidhi ltd.