Institutions

Institutions

The Samhita Development Network is an affiliation of 3 organizations:

    1. Samhita Community Development Services is the economic arm of the network. It was registered as a not-for-profit Section-25 (now Section-8) company in Bhopal, Madhya Pradesh on September 28, 2007. SCDS specializes in delivery of microfinance and microenterprise services, and web-enabled common markets for poor communities.

    2. eCubeH Research Labs is the technology arm of the network. It was registered as a private limited company in New Delhi on August 31, 2009, with its registered office moved to Bhopal, MP on February 11, 2021. eCubeH exclusively uses free and open source technologies in providing software, engineering and social technology solutions to poor communities.

    3. Samhita Development Network is the social arm of the network. It was registered as a not-for-profit Section-25 (now Section-8) company in Delhi on July 15, 2011, with its registered office moved to Bhopal, MP on December 4, 2020. SDN works among poor communities in the areas of health, education and the environment.

Legal Structure

Given the social mission, Samhita has chosen the form of a Section 25 Company for its various service institutions. A Section-25 Company is a special type of Company intended for non-profit activities, defined under the Companies Act, 1956 and validly existing under Section 8 of the Companies Act, 2013. Key characteristics of such a Company are as follows:

    • Allows no dividends to be distributed to Shareholders. Any earnings are to be retained and used only to further the Company’s objectives.

    • Promoters / Shareholders cannot be on the payroll of the organization.

    • The above principles cannot be bypassed through a customer / vendor relationship with other organization(s) having shareholders in common.

    • The Company is regulated by the Registrar of Companies, and is required to submit annual reports audited by a professional audit firm. In general there is much greater transparency, accountability and professionalism than other legal forms used by the NGO sector.

    • In the event of closure of the Company, assets may be transferred only to another such organization with similar objectives.

Exemption from registration with the RBI for ‘Not for Profit’ Companies engaged in Microfinance Activities

The Reserve Bank of India has revised and aligned the Exemption from registration with the RBI for ‘Not for Profit’ Companies engaged in Microfinance Activities under the Master Direction – Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022 (Circular No. RBI/DOR/2021-22/89, DoR.FIN.REC.95/03.10.038/2021-22 dated March 14, 2022) .

The notification specifically states the following:

9. Exemption for ‘Not for Profit’ Companies engaged in Microfinance Activities

9.1 The definition of microfinance loans for ‘not for profit’ companies (registered under Section 8 of the Companies Act, 2013) is now aligned with the revised definition of microfinance loans viz., collateral-free loans to households with annual household income up to ₹3,00,000, provided the monthly loan obligations of a household does not exceed 50 per cent of the monthly household income.

9.2 Exemptions from Sections 45-IA 3, 45-IB 4 and 45-IC 5 of the RBI Act, 1934 have been withdrawn for those ‘not for profit’ companies engaged in microfinance activities that have asset size of ₹100 crore and above.

9.3 ‘Not for profit’ companies that are not eligible for the exemptions mentioned at paragraph 9.2 above, are required to register as NBFC-MFIs and adhere to the regulations applicable to NBFC-MFIs. Such companies shall submit the application for registration as an NBFC-MFI to the Reserve Bank within three months of the issuance of this circular. Those companies that currently do not comply with the regulations prescribed for NBFC-MFIs, shall submit a board-approved plan, with a roadmap to meet the prescribed regulations, along with their application for registration.

These directions are effective from April 01, 2022.

As of March 31, 2024, Samhita Community Development Services’ own portfolio is ₹3.53 crores, which is well below the ₹100 crore threshold. Therefore, registration as an NBFC-MFI with the Reserve Bank of India is not applicable.