Government Regulation on Public Deposits

This article throws light upon the top eleven features of Government Regulation on Public Deposits. The features are: 1. Ceiling on Deposits 2. Maturity of Deposits 3. Form and Particulars of Advertisement 4. Form of Application for Deposits 5. Furnishing of Receipts to Depositors 6. Register of Deposits 7. Interest on Deposits 8. Ceiling on Brokerage 9. Repayment of Deposits and Others.

Government Regulation on Public Deposits: Feature # 1. Ceiling on Deposits:

The limits up to which deposits can be accepted by a company are:

(i) 25% of the aggregate of the paid up capital and free reserves of the company from the general public.

(ii) 10% of the aggregate of the paid up capital and free reserves as against unsecured debentures, or any deposits from its shareholders or any deposits guaranteed by its directors.

While arriving at the aggregate of the paid up share capital and free reserves of a company, the amount of accumulated balance of loss, the balance of deferred revenue expenditure and other intangible assets, if any, shall be deducted.

Government Regulation on Public Deposits: Feature # 2. Maturity of Deposits:

The maximum deposit period allowed for public deposits is 36 months and the minimum period of 6 months. However, a minimum maturity period of 3 months is allowed for deposits amounting to 10 percent of share capital and free reserves for meeting short-term requirements.

Government Regulation on Public Deposits: Feature # 3. Form and Particulars of Advertisement:

Every company intending to invite deposits shall issue an advertisement for the purpose in a leading English newspaper and in one vernacular newspaper circulating in the state at which the registered office of the company is situated. Such advertisement is issued on the authority and in the name of Board of Directors of the company.

It should provide details regarding name of the company, date of its incorporation, business carried on by the company, management of the company, particulars of directors, profitability of the company, etc.

A declaration to the effect that on the day of advertisement, the company has no overdue deposits other than unclaimed deposits and that the company has complied with the provisions of the Companies (Acceptance of Deposits) Rules.

It should further declare that the compliance with the rules does not imply that repayments of deposits are guaranteed by the Central Govt. It should clearly mention that the deposits accepted by the company are unsecured and rank pari passu with other unsecured liabilities.

Government Regulation on Public Deposits: Feature # 4. Form of Application for Deposits:

No. Company can accept or renew any deposit unless an application is made by the intending depositor for the acceptance of such deposits and such application should contain a declaration by such person to the effect that the amount is not being deposited out of the funds acquired by him by borrowings or accepting deposits from any person.

Government Regulation on Public Deposits: Feature # 5. Furnishing of Receipts to Depositors:

Every company accepting or renewing deposits is required to furnish to the depositor or his agent, a receipt for the amount received by the company.

Government Regulation on Public Deposits: Feature # 6. Register of Deposits:

A company accepting deposits shall keep at its registered office one or more registers containing details of the deposits as to name, address of the depositor, date and amount of such deposit, duration of the deposit, maturity date, rate of interest, the dates on which interest shall be paid, etc.

Government Regulation on Public Deposits: Feature # 7. Interest on Deposits:

The maximum rate of interest which may be allowed for accepting deposits by a company cannot at present exceed 15 per cent per annum on quarterly rests. However, the companies usually allow different rates of interest on deposits depending upon the tenure of deposit.

Government Regulation on Public Deposits: Feature # 8. Ceiling on Brokerage:

Companies may employ the services of brokers, managers and consultants for mobilising deposits. However, the brokerage or commission on deposits cannot exceed the prescribed limits, which has been, usually, one percent of such deposits.

Government Regulation on Public Deposits: Feature # 9. Repayment of Deposits:

Once a deposit is accepted for a certain period, the company cannot repay the same before the expiry of six months.

Government Regulation on Public Deposits: Feature # 10. Maintenance of Liquid Assets:

A company which has public deposits is required to deposit or invest by 30th day of April each year, an amount which shall not be less than 10 per cent of the amount of its deposits maturing by 31st March of the following year. The amount so set aside shall not be utilised for any purpose other than for the repayment of deposits.

Government Regulation on Public Deposits: Feature # 11. Return of Deposits:

Every company inviting deposits from the public to which these rules apply, shall file with the Registrar of Companies a return in the prescribed form duly certified by the auditors of the company. The return has to be filed on or before 30th June every year and should contain information as on 31st March of that year.

Further, a copy of the Return shall also be furnished to the Reserve Bank of India.