TERMS AND CONDITIONS FOR DEPOSITS

In last post here, we discussed definition and all exclusions and inclusions of definition of deposit in detail. In earlier post here, we have discussed general provisions on deposits as listed out in the Companies Act, 2013. Without repeating all that discussion, in this post we will take forward our discussion Terms and conditions of acceptance of deposit under Rule 3 of the Companies (Acceptance of Deposits) Rules, 2014.

A company referred to in Section 73(2) may accept deposit from its members while an eligible company may accept deposit for members and Public.

Duration of a Deposit:

No company referred to in sub-section (2) of section 73 and no eligible company shall accept or renew any deposit, whether secured or unsecured, which is repayable on demand or upon receiving a notice within a period of less than six months or more than thirty-six months from the date of acceptance or renewal of such deposit.

A company may, for the purpose of meeting any of its short-term requirements of funds, accept or renew such deposits for repayment earlier than six months from the date of deposit or renewal, as the case may be, subject to the condition that –

(a) such deposits shall not exceed ten percent of the aggregate of the paid up share capital and free reserves of the company, and

(b) such deposits are repayable not earlier than three months from the date of such deposits or renewal thereof.

Deposits: 6 – 36 month
Short term Deposit: 3 – 6 month

Where depositors so desire, deposits may be accepted in joint names not exceeding three, with or without any of the clauses, namely, “Jointly”, “Either or Survivor”, “First named or Survivor”, “Anyone or Survivor”.

Amount of Deposit:

No company referred to in sub-section (2) of section 73, shall accept or renew any deposit from its members, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal of such deposits exceeds twenty-five percent of the aggregate of the paid-up share capital and free reserves of the company.

No eligible company shall accept or renew –

(a) any deposit from its members, if the amount of such deposit together with the amount of deposits outstanding as on the date of acceptance or renewal of such deposits from members exceeds ten percent of the aggregate of the paid-up share capital and free reserves of the company;

(b) any other deposit, if the amount of such deposit together with the amount of such other deposits, other than the deposit referred to in clause (a), outstanding on the date of acceptance or renewal exceeds twenty-five percent of aggregate of the paid-up share capital and free reserves of the company.

For Eligible company aggregate is 10% +25%

No Government company as eligible company shall accept or renew any deposit, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal exceeds thirty-five percent of the aggregate of its paid up share capital and free reserves of the company.

Rate of Interest:

No company shall invite or accept or renew any deposit in any form, carrying a rate of interest or pay brokerage thereon at a rate exceeding the maximum rate of interest or brokerage prescribed by the Reserve Bank of India for acceptance of deposits by non-banking financial companies.

No Alteration:

A company shall not reserve to itself either directly or indirectly a right to alter, to the prejudice or disadvantage of the depositor, any of the terms and conditions of the deposit, deposit trust deed and deposit insurance contract after circular or circular in the form of advertisement is issued and deposits are accepted.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.