Just like banks, companies can also accept deposits from its members as well as the public subject to conditions specified in companies act 2013. Section 2(31) of the act defines deposit as It includes any receipt of money by way of deposit or loan or in any other form by company. But if any amount received from Government of India or of Foreign, amount received as loan from Financial Institution, amount received against issue of securities subject to condition that it is allotted within prescribed time, any amount received as loan from any body corporate, Inter corporate deposit bearing no interest, amount received from any International body, any non interest bearing amount kept in trust with company, amount received from director of company subject to condition it is not borrowed fund, amount received from employee of company up to his annual salary as security deposit, amount received from promoter of company who borrowed it from Bank or Financial Institution or relative till tenure of that loan but not from friend or business associate will not be called as deposit.
If any company wants to accept deposits from the public it should have networth of minimum ₹100 crores and turnover of minimum ₹500 crores. However, there is no such limit on acceptance of deposits from its members
To accept deposits from members, give a circular stating amount to be raised, interest rate, tenure, whether any deposit is outstanding, etc to members and file a final copy of the circular with the Registrar of Companies (ROC) within 30 days of circulation. If a company makes default in paying interest or repayment of an existing deposit, the company can not accept a deposit for next 5 years of making the default good. Companies have to deposit at least 20% of deposits maturing during the financial year and next financial year in a separate bank account in a scheduled commercial bank called as deposit repayment reserve account. However these conditions will not be applicable to companies accepting deposits up to its paid up share capital and free reserves and securities premium reserve or if a company is a startup company till 10 years from date of incorporation.
Companies can not accept deposits repayable on demand. Tenure of deposit should be between 6 months to 36 months. However, for short term requirements it can accept deposit with a maturity period of 3 months to 6 months but the amount such deposit can not be greater than 10% of paid up share capital and free reserves of the company. Companies can’t offer interest rates higher than the limit prescribed by the Reserve Bank of India for Non Banking Financial Companies.
If deposits are secured i.e., If charge is created on assets of a company to secure payment of interest and repayment of deposit, it has to appoint a deposit trustee by executing deposit trust deed who will protect the interest of depositors and solve grievances of depositors. He/She should not be an employee/director/relative of said persons of company, its holding, its subsidiary or associate company. He/she should not be indebted to the company and should not be the person who provided guarantee to the company in favor of any person.
Also read: Registration of Charges By Companies As Per Companies Act 2013 and charges rules