NBFC

Acceptance of Deposit in Companies Act 2013

AS per Companies Act deposit is defined as under:
“deposit” comprises of any kind of receipt of money by way of deposit or loan or in any other form by a company, but does not include such categories of amount as may be mentioned in discussion with (RBI) Reserve Bank of India;

Prohibition on Acceptance of Deposit from Public

The act states that not a single company shall invite & accept or renew deposits under this Act from the public except in the manner provided under

Exceptions to a prohibition don’t apply to

— A banking company; &

— Non- Banking Financial Company (NBFC) as mentioned in Reserve Bank of India Act, 1934; &

— To such other company as (C.G), Central Government may, after consultation with (RBI) Reserve Bank of India, laid down in this behalf.

Conditions for the acceptance of deposit from the Members states that a company may, subject to-

(i) Passing of a resolution in general meeting; &

(ii) dependent on such rules and regulations as may be prescribed in discussion with the (RBI) Reserve Bank of India, accept deposits from its members on such a terms & conditions, together with the provision of security, or for the repayment of such the deposits with interest, as may be agreed upon between the company & its members, subject to the fulfilment of following conditions, namely:—

(a) issuance of circular to their members encompassing therein the statement showing a financial position of the company and the credit rating obtained and the total number of depositors & the amount due towards the deposits in respect of any previous deposits accepted by company & such other particulars in such form & in such a manner as may be prescribed;

(b) Filing a copy of a circular together with such a statement together with a Registrar within 30 days before the date of issue of such a circular;

(c) Depositing such a sum that shall not be less than 15% of the amount of its deposit maturing during the financial year & financial year next following, & kept in a scheduled bank in a separate bank account to be called as deposit repayment reserve account;

(d) Providing such deposit insurance in such manner & to such an extent as may be prescribed;

(e) Certifying that a company hasn’t committed any default in the repayment of deposits accepted either before or after the commencement of this Act or payment of interest on such deposits; &

(f) Providing security, for the due repayment of the amount of deposit or the interest thereon comprising the creation of such charge on a property or assets of a company. In the case where a company doesn’t secure the deposits or secures such deposits partially, the deposits shall be called as ‘‘unsecured deposits’’ & shall be so quoted in each circular, form, advertisement or in any document related to invitation or acceptance of the deposit.

It states that every deposit accepted by the company under the act shall be refunded with the interest in keeping with the terms & conditions of the agreement as mentioned.

It also states that when a company fails to repay such deposit or part thereof or any interest thereon under the depositor concerned may apply to Tribunal for the order directing a company to pay a sum due or for any loss or damage incurred by him as a result of such non-payment & for such orders as the Tribunal may deem fit.

Acceptance of Deposit from Public by Certain Companies

The Act states that nevertheless anything contained in the Act, a public company that is having net worth or turnover as may be agreed, may accept deposits from persons excluding its members subject to the compliance with the requirements as mentioned in the Act & subject to such rules as (C.G) Central Government may, in discussion with the (RBI) Reserve Bank of India.

Such a company shall be required to obtain the rating (consisting its net worth, liquidity & ability to pay its deposits on due date) from the recognized credit rating agency for informing the public a rating given to such a company at time of invitation of deposits from public that makes sure satisfactory safety & the rating shall be obtained for every single year during the period of deposits.

All the company which is accepting secured deposits from the public shall within 30 days of such acceptance, create the charge on its assets of an amount minimum of the amount of deposit accepted in favor of the deposit holders in accordance with such rules and regulations as may be prescribed.

It also states that the provisions of shall, mutatis mutandis, apply to acceptance of deposit from public under this section.

Registers of Deposits

(1) Every single company accepting deposits shall from the date of such acceptance, keep at its registered office 1 or more than 1 separate registers for deposits accepted/renewed, in which there shall be entered separately in case of each depositor the following particulars, namely:

• Name and address & PAN of the depositor/s;
• Particulars of guardian, in case of a minor;
• Particulars of the nominee;
• Deposit receipt number;
• Date and amount of each deposit;
• Duration of the deposit and the date on which each deposit is repayable;
• Rate of interest;
• Due date(s) for payment of interest;
• Mandate & instructions for payment of interest & for non-deduction of tax at source, if any;
• Date or dates on which payment of interest will be made;
• Details of deposit insurance including the extent of deposit insurance;
• Particulars of other security/ charge created;
• Any other particulars relating to the deposit;

(2)The entries made in the register will be made within 7 days from the date of issuance of deposit receipt & such entries shall be made valid by the director or secretary of a company or by any other officer authorized by the Board for this purpose.

(3) The register referred to this shall be preserved for a term not less than 8 years from the financial year in which the latest entry is made in the register

Return of Deposits to be Filed with ROC

Every single company to which these rules apply, shall on or before the 30th day of June, of every year, file with Registrar a return in Form DPT-3 together with the fee as provided in Companies (Registration Offices and Fees) Rules, 2014 & furnish the information contained as on the 31st day of March of that year duly audited by the auditor of the company.

Conclusion

The provisions of Companies Act 2013^[1] read with rules has brought numerous restoring aspects to protect the interest of depositors. The gist of provisions discussed above is as follows.

— The company might accept deposit from its members by passing the resolution in general meeting & subject to the conditions as may be prescribed in the Rules comprising Credit rating, Deposit insurance, etc.

— Public companies may perhaps accept deposits if it has net worth of minimum of 100 crore rupees or the turnover of not less than 500 crore rupees & which has obtained the prior consent of company in general meeting by means of the special resolution & also filed the said resolution with Registrar of Companies & where applicable, with (RBI) Reserve Bank of India previously making any invitation to Public for acceptance of Deposits.

— No company or any of the eligible company shall issue a circular or advertisement inviting secured deposits without the company has appointed 1 or more deposit trustees for creating security for the deposits.

— A contract that is providing for the deposit of insurance at least 30 days prior to the issue of circular or advertisement.

— Companies which are accepting deposits from the members or eligible companies have to fulfill the conditions specified in Companies (Acceptance of Deposits) Rules 2014.