Acceptance of Deposits by Companies
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- Chapter V (Sections 73–76A) plus the Companies (Acceptance of Deposits) Rules, 2014 govern deposits. 'Deposit' [Sec 2(31)] is inclusive — any receipt of money as deposit, loan or in any other form — with 18 exhaustive exclusions in Rule 2(1)(c).
- Section 73(1) prohibits public deposits except in the Chapter V manner; banking companies, NBFCs (proviso), HFCs (Rule 1(3)) and CG-notified companies are outside it.
- Members' deposits [Sec 73(2)]: any company — private or public — can accept, via resolution → DPT-1 circular → ROC filing → 20% DRR → no-default certificate → security; tenure 6–36 months, ceiling 35% of aggregate (100% for private/Specified IFSC companies).
- Public deposits [Sec 76]: only eligible companies — public, net worth ≥₹100 crore OR turnover ≥₹500 crore — with special resolution, annual credit rating and charge on tangible assets; ceilings 10% members, 25% non-members, 35% Government companies.
- Section 76A: company fine ₹1 crore or twice the deposit (whichever lower), extendable to ₹10 crore; officers up to 7 years plus ₹25 lakh–₹2 crore fine, Sec 447 if fraudulent intent. Section 74 makes pre-2013 deposits repayable within 3 years or tenure, whichever earlier.
Companies Act, 2013 as amended, per the May 2026 syllabus. Section numbers are the Companies Act, 2013; rule numbers are the Companies (Acceptance of Deposits) Rules, 2014, unless stated.
How the chapter fits together
Chapter V of the Act (Sections 73–76A) read with the Deposit Rules, 2014 is one funnel: define what a deposit is, carve out what it is not, then split the world into members’ deposits (any company) and public deposits (eligible companies only) — with punishment provisions at the end. Learn it as a pipeline:
- Definitions — Deposit [Sec 2(31)] → 18 exclusions [Rule 2(1)(c)] → Depositor [Rule 2(1)(d)] → Eligible company [Rule 2(1)(e)] → Specified IFSC public company →
- 73(1) prohibition on public deposits, except in the Chapter V manner (banking companies, NBFCs, HFCs, CG-notified companies exempt) →
- 73(2)–(5) members’ deposits — open to private and public companies alike →
- 76 public deposits — eligible companies only; the rest of the regime applies mutatis mutandis [76(2), Rule 19] →
- 76A punishment for contravening 73/76; 74 pre-2013-Act deposits; Rule 18 — CG (with RBI) decides applicability questions.
Two mnemonics from the source, worth memorising verbatim:
- Members’-deposit flow: “Resolution Circular Filing DRR Certify Security” = RCFDCS.
- Ceilings “3-1-2-3-2”: 35 (members) – 10 (eligible co, members) – 25 (eligible co, non-members) – 35 (Govt eligible co) – 20 (DRR) per cent.
What counts as a deposit — definition and 18 exclusions
Deposit [Sec 2(31)]
An inclusive definition — any receipt of money as deposit, loan or in any other form by a company. It excludes only the categories prescribed in consultation with the RBI. Trap: the definition is inclusive/open, but the exclusion list is exhaustive/closed — exactly 18 items.
Depositor [Rule 2(1)(d)]
(i) A member depositing money under Sec 73(2); (ii) any person depositing money with a public company under Sec 76. Trap: a non-member can never be a depositor of a private company.
Eligible company [Rule 2(1)(e)]
A public company with net worth ≥₹100 crore OR turnover ≥₹500 crore, which has obtained prior consent by special resolution filed with the ROC before inviting public deposits. Trap: it is OR, not AND — and a private company can never be an eligible company.
Specified IFSC public company
An unlisted public company licensed by RBI/SEBI/IRDAI, operating in an IFSC/SEZ. Despite being public, it gets the 100% member-deposit ceiling like a private company [GSR 8(E)].
DRR [Sec 73(2)(c), Rule 13]
≥20% of deposits maturing during the following financial year, kept in a scheduled bank by 30 April. Use is restricted — deposit repayment only [Sec 73(5)].
Deposit features to recall: time-bound repayment; secured or unsecured (a secured deposit carries a charge on tangible assets ≥ deposit + interest, valued by a registered valuer; an unsecured deposit must be quoted as “unsecured” everywhere); joint names up to 3; nomination; repayment with interest; premature repayment allowed; private company → members only, public company → members plus (if eligible) the public.
Every “amount received” is tested first against Sec 2(31), then against all 18 exclusions of Rule 2(1)(c):
| # | Not a deposit | Key condition / trap |
|---|---|---|
| 1 | Amounts received from or guaranteed by Central/State Government; local or statutory authority | — |
| 2 | Foreign Governments/banks/multilateral institutions/FDI/collaborators/citizens | Subject to FEMA, 1999 |
| 3 | Loan from a banking company / SBI subsidiary / notified bank / co-operative bank | — |
| 4 | Loan from PFI / regional FI / insurance company / Scheduled Bank | — |
| 5 | Commercial paper / RBI-notified instruments | — |
| 6 | ICD — amount received from any other company | Never a deposit |
| 7 | Share application/subscription money | Allot within 60 days, else refund within the next 15 days, else deemed deposit; adjustment ≠ refund |
| 8 | Director’s money; relative-of-director money (private company) | Written declaration (not from borrowed funds) + Board’s Report disclosure |
| 9 | Bonds/debentures | First (or pari passu) charge on Sch III tangible assets (≤ market value) OR compulsorily convertible within 10 years |
| 9A | NCDs | Unsecured (no charge) AND listed on a recognised stock exchange (SEBI regs) — both conditions needed |
| 10 | Employee security deposit | Non-interest bearing and ≤ annual salary |
| 11 | Non-interest bearing amount held in trust | — |
| 12 | Business advances: (a) goods/services supply ≤365 days (no limit if sub judice); (b) immovable-property advance; (c) performance security deposit; (d) long-term capital-goods project advance; (e) warranty/maintenance ≤ common practice or 5 years, whichever less; (f) sectoral-regulator/Govt-directed advance; (g) publication subscription advance | If refundable for lack of permission/approval → deemed deposit on expiry of 15 days from the due date |
| 13 | Promoter’s unsecured loan per bank/FI stipulation | Exempt only until the institution’s loan is repaid |
| 14 | Nidhi company amounts (Sec 406 rules) | — |
| 15 | Chit subscriptions (Chit Funds Act, 1982) | — |
| 16 | Collective Investment Scheme (SEBI regs) | — |
| 17 | Start-up convertible note | ≥₹25 lakh, single tranche, convertible/repayable ≤10 years — all three; splitting tranches ruins it even if the aggregate is ≥₹25 lakh |
| 18 | SEBI-registered AIF / domestic VCF / InvIT / REIT (w.e.f. 22-01-2019) / Mutual Funds | — |
Circular 5/2015 (30-03-2015): amounts a private company received from members/directors/relatives before 1-4-2014 are not deposits if disclosed in the notes to accounts — but any renewal on or after 1-4-2014 must comply afresh.
Members’ deposits — Section 73
Sec 73(1) is the gatekeeper: no company may accept or invite public deposits except in the manner provided by Chapter V. Outside the prohibition altogether: banking companies and NBFCs (via the 73(1) proviso itself), HFCs registered with the NHB (via Rule 1(3) — not the proviso), and any other CG-notified company (in consultation with the RBI).
Sec 73(2) lets any company — private or public — accept deposits from its members by resolution in general meeting, subject to conditions (a)–(f):
- (a) Circular to members in Form DPT-1 — financial position, credit rating, auditor certificate — by registered post / speed post / electronic mode.
- (b) Filing — file the circular with the ROC 30 days before issue.
- (c) DRR — ≥20% of deposits maturing during the following FY into a scheduled bank by 30 April.
- (d) Deposit insurance — omitted by the 2017 Amendment w.e.f. 15-08-2018; no longer required.
- (e) No-default certificate — no default in repayment; if there was one, it was made good and 5 years have lapsed since.
- (f) Security — charge on assets for secured deposits; unsecured deposits must be quoted as such.
Then: 73(3) repayment with interest per the agreed terms; 73(4) an aggrieved depositor may apply to the NCLT for a repayment/damages order; 73(5) DRR use is restricted to repayment.
The operating mechanics sit in the Rules:
| Rule | Requirement | Numbers to remember |
|---|---|---|
| 3(1) | Tenure 6–36 months; never repayable on demand | Short-term exception: min 3 months, ≤10% of aggregate |
| 3(2) | Joint names — max 3 persons | Clauses: Jointly · Either or Survivor · First named or Survivor · Anyone or Survivor |
| 3(3) | Member ceiling ≤35% of aggregate (100% for private/Specified IFSC cos) | Aggregate = paid-up capital + free reserves + securities premium |
| 3(6) | Interest ≤ RBI’s max rate for NBFCs; brokerage only to an authorised person | — |
| 3(7) | No alteration disadvantageous to depositors after issue | — |
| 4 | Circular/advertisement in Form DPT-1; English + vernacular newspaper | Validity: earlier of 6 months from FY close or the date financial statements are laid at the AGM; fresh one each FY |
| 6 | Charge for secured deposits within 30 days; tangible assets only | Valuation by a registered valuer |
| 7 | Deposit trustee: consent; trust deed DPT-2 ≥7 days before the circular; disqualifications; removal | Disqualified: director/KMP/officer/employee/depositor/indebted/pecuniary interest/guarantor/related party |
| 9 | Meeting of depositors | On requisition of ≥1/10th in value, or a default event |
| 10 | Application form with declaration — money not borrowed | — |
| 11 | Nomination — any person, any time | — |
| 12 | Deposit receipt within 21 days, signed by an authorised officer | — |
| 14 | Register of deposits at the registered office | Entries within 7 days of receipt issuance; preserve 8 years from the FY of the latest entry |
| 15 | Premature repayment only after 6 months, interest 1% less | No cut for: repayment to comply with Rule 3 ceilings; war-risk/emergency benefit to defence personnel (Art. 352). Premature closure for a higher rate: only if renewed longer than the unexpired period |
| 16 | Annual return DPT-3 by 30 June, audited (non-Govt companies) | — |
| 16A | Disclosures: public co — directors’ money; private co — directors + relatives | One-time DPT-3 return within 90 days from 31-3-2019 |
| 17 | Penal interest 18% p.a. on overdue deposits | — |
Private-company relaxations [GSR 464(E), 05-06-2015] — exempt from the Sec 73(2)(a)–(e) conditions if any ONE holds:
- (A) accepts from members ≤100% of aggregate (paid-up capital + free reserves + securities premium); or
- (B) is a start-up, for 5 years from incorporation; or
- (C) satisfies ALL of: not an associate/subsidiary of any company; borrowings from banks/FIs/body corporates less than 2× paid-up capital or ₹50 crore, whichever is lower; no default on such borrowings.
They must still file DPT-3. Specified IFSC public companies (≤100% of paid-up capital + free reserves) are similarly exempt [GSR 8(E)]. Separately, the 35% ceiling of Rule 3(3) does not apply at all to (i) a private-company start-up for 10 years from incorporation, and (ii) a private company meeting the same three conditions as (C) — such companies may accept up to 100%, filing DPT-3.
Public deposits by eligible companies — Section 76
Only an eligible company may invite deposits from the public. On top of the members’-deposit machinery, Sec 76(1) adds:
- Special resolution filed with the ROC before inviting deposits — an ordinary resolution suffices only if the deposit sought is within the Sec 180(1)(c) borrowing limits.
- Credit rating — obtained and renewed annually [1st proviso to 76(1)]; copy filed with the ROC along with DPT-3 [Rule 3(8)].
- Charge on tangible assets within 30 days of accepting secured deposits [2nd proviso to 76(1); Rule 6].
- Everything else mirrors the members’ regime — Secs 73 and 74 apply mutatis mutandis [Sec 76(2); Rule 19].
The ceilings — all percentages of aggregate (paid-up capital + free reserves + securities premium):
| Ceiling | Who can accept, from whom | Rule |
|---|---|---|
| 35% | Any company, from members (general limit) | 3(3) |
| 100% | Private company / Specified IFSC public company, from members | 3(3) provisos; GSR 8(E) |
| 10% | Eligible company, from members | 3(4) |
| 25% | Eligible company, from non-members (public) | 3(4) |
| 35% | Government eligible company | 3(5) |
| 20% | DRR — not a ceiling, but the fifth number of the “3-1-2-3-2” mnemonic | 73(2)(c); Rule 13 |
Punishments, pre-2013 deposits and key timelines
Sec 74 — pre-2013-Act deposits: for deposits accepted before this Act commenced, the company had to (a) file a statement with the ROC within 3 months, and (b) repay within 3 years or the tenure’s expiry, whichever is earlier [74(1)]. The Tribunal may allow further reasonable time on application [74(2)]. Non-repayment attracts 74(3) — the same punishment bands as 76A, differing only in trigger (pre-2013 non-repayment vs 73/76 contravention). Rule 18: the Central Government, in consultation with the RBI, decides any question of applicability — the final word on borderline cases.
| Default | Liable | Penalty | Provision |
|---|---|---|---|
| Contravening the Sec 73/76 manner, or failing to repay in time | Company | Fine ≥₹1 crore or 2× the deposit, whichever is lower, extendable to ₹10 crore — plus repayment of deposit with interest | 76A(a) |
| Contravening Sec 73/76 | Officer in default | Imprisonment up to 7 years and fine ₹25 lakh–₹2 crore | 76A(b) |
| Knowing/wilful contravention with intent to deceive | Officer in default | Liable under the fraud provision | Sec 447 |
| Non-repayment of pre-2013 deposits | Company | Fine ₹1 crore–₹10 crore | 74(3) |
| Non-repayment of pre-2013 deposits | Officer in default | Imprisonment ≤7 years or fine ₹25 lakh–₹2 crore, or both | 74(3) |
| Failure to repay member deposits or interest | Depositor’s remedy | Apply to the NCLT for a repayment/damages order | 73(4) |
| Overdue deposit (secured/unsecured) after maturity + claim | Company | Penal interest 18% p.a. for the overdue period | Rule 17 |
| Any contravention with no specific punishment elsewhere | Company + every officer in default | Fine ≤₹5,000; continuing — further ≤₹500/day | Rule 21 |
Memory hook: 76A ≈ 74(3) in bands (₹1–10 crore company / 7 years + ₹25 lakh–₹2 crore officer) — they differ only in trigger.
| When | What happens | Where |
|---|---|---|
| 7 days before circular/advt | Execute deposit trust deed (DPT-2) | Rule 7(2) |
| 30 days before issue | File circular/advertisement copy with the ROC | 73(2)(b); Rule 4 |
| 60 days, then 15 days | Allot securities against application money, else refund — else deemed deposit | R2(1)(c)(vii) |
| 15 days from due date | Business advance refundable for want of approval becomes a deemed deposit | R2(1)(c)(xii) proviso |
| 365 days | Limit for trade advance for goods/services (no limit if sub judice) | R2(1)(c)(xii)(a) |
| 5 years | Warranty/maintenance advance cap (or common practice, if less) | R2(1)(c)(xii)(e) |
| ≤10 years | Bond/debenture convertibility · start-up note conversion/repayment | R2(1)(c)(ix)/(xvii) |
| 6–36 months | Deposit tenure; short-term exception ≥3 months, ≤10% cap | Rule 3(1) |
| 30 April | DRR: ≥20% of next-FY maturities into a scheduled bank | 73(2)(c); Rule 13 |
| 21 days | Furnish the deposit receipt | Rule 12 |
| 7 days | Register-of-deposits entry after receipt issuance | Rule 14 |
| 8 years | Preserve the register (from the FY of the latest entry) | Rule 14 |
| 6 months | Circular validity (from FY close, or AGM date if earlier) · minimum holding before premature repayment | Rule 4 · Rule 15 |
| 30 June | File annual return DPT-3 (audited) | Rule 16 |
| 30 days | Create the charge after accepting secured deposits | Rule 6; 2nd proviso 76(1) |
| 3 months / 3 years | Pre-2013 deposits: file statement / repay (or tenure, whichever earlier) | 74(1) |
| 90 days from 31-3-2019 | One-time DPT-3 return (money-not-deposits, 1-4-2014 to 31-3-2019) | Rule 16A(3) |
| 5 years / 10 years | Start-up exemptions: from 73(2)(a)–(e) / from the 35% ceiling | GSR 464(E) · Rule 3(3) |
| Annual | Credit rating renewal | 1st proviso 76(1); Rule 3(8) |
- Mixing the ceilings — 35% members (any company) vs 10% eligible-co members vs 25% eligible-co non-members vs 35% Govt eligible co. Recall “3-1-2-3-2” and that 100% belongs only to private/Specified IFSC companies.
- Swapping 20% DRR (a reserve percentage) with 18% penal interest (a rate on overdue deposits) — the most commonly exchanged pair.
- Thinking Sec 73(2) is for public companies — any company can accept members’ deposits; only an eligible company can use Sec 76, and a private company can never be eligible.
- Citing the 73(1) proviso for the HFC exemption — HFCs are exempted via Rule 1(3); the proviso covers banking companies and NBFCs.
- Confusing the NCD exclusion (ixa) with bonds/debentures (ix) — (ixa) needs unsecured + listed (both); (ix) needs a Sch III charge or convertibility within 10 years.
- Requiring deposit insurance — Sec 73(2)(d) and register clause (k) were both omitted by the 2017 Amendment w.e.f. 15-08-2018; a trap in older questions.
- Treating adjustment of share application money as a refund — allot within 60 days, refund within the next 15, else deemed deposit; adjustment is not refund.
- Giving start-ups one relief — there are two separate ones: 5-year exemption from the 73(2)(a)–(e) conditions [GSR 464(E)] and 10-year exemption from the 35% ceiling [Rule 3(3)].
Quick revision cards
Who is an eligible company?
Ceiling mnemonic 3-1-2-3-2?
Deposit tenure limits?
DRR in one line?
Aggregate for all % ceilings?
Sec 76A punishment?
Pre-2013 deposits (Sec 74)?
Share application money rule?
The three DPT forms?
Receipt and register timelines?
Who escapes the 73(1) prohibition?
Premature repayment rule?