Under the revised norms, all nidhi firms will have a deposit cap of Rs 20 crore and once this limit is crossed a nidhi will become a non-banking finance company. Nidhi companies having a deposit of over Rs 20 crore (upto Nov 1) will not be allowed to increase the deposit beyond this limit, an official statement said. DCA norms also stated that no nidhi will be allowed to accept deposit for a period of less than 6 months.

Nidhis will not be allowed to give loans to its directors beyond Rs 15 lakh. If loans are given to directors beyond this limit they would be bound to bring it down to Rs. 15 lakh within a period of one year. Each nidhi will be required to maintain a contigency fund which will be built up by transferring 0.5 per cent of each deposit to this fund which willbe kept in deposit form with a nationalised bank.

On the management of nidhi companies, DCA has said that these companies will not be allowed to enter into any arrangement for change of management without the approval of DCA. The directors appointed to the board of nidhis cannot hold the post beyond the period of 10 years. Such directors can be re-appointed only after a gap of two years.

DCA guidelines have also stated that nidhis which are having branches outside the state in which they are registered will be given three years time to shut down their branches outside the state.

Similairly, nidhis having more than three branches in the state or within the district will be given five years time to bring them down to the ceiling of three branches over and above the registered headquarters. DCA will have the right to appoint a special officer to monitor the working of the nidhis in case a default in repayment of deposits is alleged by more than 10 depositors. The directions given by the officer will bebinding on the nidhis. The department will also have the right for special audit of the company and its accounts if the auditors are found giving vague certificate relating to companies.

MUMBAI: The DCA move to put restrictions on deposit mobilisation by nidhi companies was long overdue. ``Many fly-by-night operators had floated nidhi companies and decamped with the hard-earned money of investors. It's better late than never,'' said a market source, adding that hundreds of such companies had mushroomed in West Bengal, Bihar, Maharashtra and Tamil Nadu.

``With lax regulations, investors were taken for a ride. Funds collected from investors diverted for the private uses of directors and promoters. If properly regulated, this is one area which can channelise the money of investors into good avenues,'' said an investor. There was also ambiguity in the regulation of nidhis. The collapse of Kuber last year had created panic among investors. It is surprising that the DCA and the Reserve Bank of Indiatook a long time to frame proper guidelines for the functioning of nidhi companies.