The regulations follow representations by nidhi companies -- incorporated on or before January 9, 1997, and not yet notified by DCA -- that they cannot avail of the special dispensation available to notified nidhi companies as RBI had classified such companies as loan companies.

Notified nidhi companies are exempted from several core provisions of RBI Act as they were being regulated by DCA.

The regulations, similar to those applicable to notified nidhi companies, stipulate that a company must have been incorporated on or before January 9, 1997, and has applied for issue of certificate of registration to RBI within the stipulated six-month period.

The companies incorporated after January 9, 1997, will be considered for classification asmutual-benefit companies only if they have minimum net owned funds (NOF) of Rs 25 lakh and have obtained a certificate of registration from RBI under the provisions of the RBI Act.

The company must also strictly comply with the directions issued to the nidhi by the bank under the provisions of the RBI Act. It must also comply with directions issued by the DCA.

The regulations further state that MFCs must have minimum total net-owned funds and preferential share capital of Rs 10 lakh on the date of last audited balance sheet. These companies should also submit an undertaking duly certified by the company's auditors that it fulfils the eligibility norms, a RBI statement said.

The regulatory norms and special dispensation as applicable to MBFCs will also be extended to companies satisfying the laid down regulations. Further, the companies will be given time up to December 31, 2002, to reach the amount of Rs 25 lakh as notified by the DCA.

The RBI statement said that the MDCs whose functioning does notconform to the latest requirements have been advised to stop accepting further deposits failing which they will invite action under the RBI Act.