We present J and K -band luminosity functions ( LF ) for the Group Evolution Multiwavelength Study ( GEMS ) sample of 60 nearby groups of galaxies , with photometry from the 2MASS survey . We find that , as seen in B and R -band photometry of a subsample of these groups in our earlier work , the LFs of the X-ray dim groups ( L _ { X } < 10 ^ { 41.7 } erg s ^ { -1 } ) show a depletion of galaxies of intermediate luminosity around { M _ { K } } = -23 , within a radius 0.3 R _ { 500 } from the centres of these groups . This feature is not seen in the X-ray brighter groups , nor in either kind of group when the LFs are determined all the way out to R _ { 500 } . We conclude that an enhanced level of star formation is not responsible for the this feature . From the faint end of the LFs , we find support for the under-abundance of low surface brightness dwarfs in the 2MASS survey . We find that for all kinds of groups , the modelling of the luminosity function , with universal forms for the LFs of galaxies of different morphological types , fails when simultaneously required to fit the B and K -band LFs . This means that the dip-like features seen in LFs are not merely due to the varying proportions of galaxies of different morphological types among the X-ray dim and bright groups . We argue that this support our hypothesis that this feature is due to the enhanced merging of intermediate-mass galaxies in the dynamically sluggish environment of X-ray dim groups .