Compliance Governance:
Industry Structure
All about Nidhi
Nidhi Company is one that belongs to the non-banking Indian finance sector and is recognized under section 406 of the Companies Act, 2013. Its main business is borrowing and lending money amongst its members. Also known as Benefit Funds, Mutual Benefit Funds, Permanent Fund and Mutual Benefit Company. The very basic purpose of Nidhi is a company which has been incorporated with the object of developing the habit of thrift and savings habits amongst its members and also receiving deposits and lending to its members only for their mutual benefit.
Nidhi companies existed even prior to the existence of companies Act 2013. The basic concept of Nidhi is “Principle of Mutuality”. These companies are more popular in South India, and 80% of Nidhi companies are located in Tamil Nadu. Nidhi companies are governed by Nidhi Rules, 2014. They are incorporated in the nature of Public Limited company and hence, they have to comply with two set of norms, one of Public limited company as per Companies Act, 2013 and another is for Nidhi rules, 2014.
In terms of Section 45-IA of the RBI Act, 1934, no Non-banking Financial company can commence or carry on business of a non-banking financial institution without a) obtaining a certificate of registration from the Bank and without having a Net Owned Funds of as per specified limit. However, in terms of the powers given to the Bank, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking companies registered with SEBI, Insurance Company holding a valid Certificate of Registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act, 1956, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982,Housing Finance Companies regulated by National Housing Bank, Stock Exchange or a Mutual Benefit company.
Code of Ethics and Practices
TRANSPARENCY
I. Kingsman Nidhi shall make all the possible efforts to bring transparency to members while providing loan facility by providing loan application forms with terms and conditions mentioning the supporting documents to be submitted along with the same. An acknowledgement for receipt of duly completed loan application forms will be given to the customer in all cases. As a matter of policy and customer service loan applications are sanctioned / rejected immediately. Disbursement of the loan and acceptance of security will be carried out nearly simultaneously.
II. Kingsman Nidhi shall disclose all relevant information relating to a loan / product such as eligible loan amount, interest rate, charges, penal/overdue interest, interest calculation methodology, rebate on interest etc. before sanction of the loan to enable the customer / prospective customer to take an informed decision. The Customer / prospective customer will also be provided, on request, the detailed terms and conditions of the loan before sanction.
III. Kingsman Nidhi shall ensure that a loan sanction letter is given to the customer containing all the terms and conditions governing the loan facility. The loan sanction letter will also mention the loan amount, loan account number, interest rate, charges, loan processing fees etc. The loan sanction letter which will bear the signature of the authorized official of the company will also serve as a receipt for the security pledged at the branch by the customer.
IV. Kingsman Nidhi shall not in the normal course make any changes / modifications in the terms and conditions of the loan, including rate of interest, which could adversely affect the customer financially or otherwise. In abnormal circumstances when such changes / modifications are inevitable, keeping in view the new circumstances, adequate and proper notice shall be given to the customer about any such change/modification.
V. Kingsman Nidhi shall follow all the norm and regulations prescribed by RBI and Ministry of Corporate Affairs.
POLICY FOR LOAN RECOVERY DEFAULTS, EXERCISE OF LIEN
I. Kingsman Nidhi will not, as a matter of fair dealing, normally recall the loan before the initially agreed tenure except in unanticipated or abnormal circumstances where the Company’s interests are adversely affected. However, we understand the crises that impact members, for such action and hence in such cases reasonable notice shall be given to the member recalling the loan before expiry of the normal tenure.
II. Kingsman Nidhi will deliver collateral to the customer immediately upon settlement of the loan in the same condition as was at the time of sanction of the loan. In case of any damage caused to the security due to mishandling by its employees, the Company shall bare the cost to repair the same or alternately pay reasonable compensation to the member.
III. Kingsman Nidhi will make all possible efforts to get the customer to repay the dues without resorting to disposal of the security. The Company does not accept nor will it encourage the use any coercive or hard measures to recover its dues from the members.
IV. Kingsman Nidhi will take all the possible actions resort to disposal of security only as a last resort and that too after adequate and proper notice is served on the customer to repay the dues. Such notice will be as per the terms contained in the sanction letter and also in compliance with applicable laws and regulatory guidelines.
V. Kingsman Nidhi encourages members to take back delivery of the security immediately upon closure of loan for all dues. However, should there be exceptional instance of the Customer being unable to take delivery of the security, not attributable to the inability of the Company, after closure of the loan account reasonable safe custody charges may be payable which will be duly advised to the members from time to time.
VI. The Company will not interfere in the affairs of the customers except for the purposes mentioned in the terms & conditions of the loan or when constrained to do so due to inadequate or false disclosures made by the borrower at the time of putting through the transactions
CUSTOMER SERVICE & GRIEVANCE REDRESSAL
I. Kingsman Nidhi will implement all possible steps to prevent and minimize customer complaints / grievances
II. Kingsman Nidhi will put in place an effective training system to ensure that employees of the Company are member friendly and do not resort to inappropriate or unethical behaviour.
III. We will endeavour to work out and display the time norms for putting through and completing the various transactions.
IV. The Company will have a sympathetic approach to the problems faced by the members especially the poor and underprivileged sections.
V. The goal of Nidhi is always been member satisfaction and providing support system for the growth of members, all the required steps will be taken to achieve the same.
MISCELLANEOUS
I. Kingsman Nidhi shall display the normal business hours at the respective branches, the list of holidays and notify the changes, if any, by way of a notice displayed in the premises of the branch or through press notification.
II. Personal information of the members will not be shared with unauthorized persons or agencies or third parties by the Company.