Lok Sabha Question No. 1803 (UNSTARRED), answered on 2018-07-27
Subject: Restriction on Companies Raising FDs
Ministry: CORPORATE AFFAIRS
Asked by: BIDYUT BARAN MAHATO, T. RADHAKRISHNAN, VIJAY KUMAR S.R., S. RAJENDRAN, CH. MALLA REDDY, SUDHEER GUPTA, KUNWAR HARIBANSH SINGH, GAJANAN CHANDRAKANT KIRTIKAR

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO. 1803 ANSWERED ON FRIDAY, THE 27 th  JULY, 2018/ SHRAVANA 5, 1940 (SAKA)

## RESTRICTION ON COMPANIES RAISING FDs QUESTION

1803.  SHRI BIDYUT BARAN MAHATO:

SHRI T. RADHAKRISHNAN:

SHRI S.R. VIJAYAKUMAR:

SHRI S. RAJENDRAN:

SHRI CH. MALLA REDDY:

SHRI SUDHEER GUPTA:

KUNWAR HARIBANSH SINGH:

SHRI GAJANAN KIRTIKAR:

Will the Minister of CORPORATE AFFAIRS

मंत्री

be pleased to state:

- (a) whether the International Monetary Fund (IMF) has written to the Government that  the  provision  for  companies  to  access  deposits  from  the  public  should  be reviewed and if so, the details thereof and the response of the Government thereto;
- (b) whether  companies  are  raising  fixed  deposits  from  the  public,  which  often offer two-three percentage points higher interest rate than banks, but are seen to be riskier;
- (c) if  so,  whether  the  Government  has  taken  cognizance  that  in  many  cases companies have not refunded fixed deposits amount with interest of the depositors and  if  so,  the  details  of  these  companies  along  with  the  action  taken  by  the Government in this regard;
- (d) whether the Government proposes norms on the amount of deposits that can be raised and linking it to the turnover or other financial parameters to ensure that companies remain credit worthy and if so, the details thereof; and
- (e) the  steps  taken/being  taken  by  the  Government  to  restrict  companies  from raising  fixed  deposits  from  the  public  and  the  time  by  which  such  restriction  is likely to be imposed?

कारपोरेट कार्य

| ANSWER MINISTER OF STATE FOR LAW AND JUSTICE   | (SHRI P. P.            |
|------------------------------------------------|------------------------|
| CHAUDHARY)                                     |                        |
| AND CORPORATE AFFAIRS                          | ( श्री पी. पी. चौधरी ) |

विवि

और

न्याय

एिं

कारपोरेट

कायय

मंत्रालय

में

राज्य

मंत्री

(a)  to  (e):-  The  Reserve  Bank  of  India  (RBI)  had  forwarded  a  reference  from  the International  Monetary  Fund  (IMF)  on  the  subject  'Assessment  of  Observance  of the  Basel  Core  Principles  for  effective  Banking  Supervision  -Financial  Sector Assessment Program (FSAP), IMF' wherein  it has been stated therein that IMF had undertaken  a  detailed  assessment  of  observance  of  the  Basel  Core  Principles under its Financial Sector Assessment Program (FSAP) in India and the final report was  published  on  19.01.2018.  In  the  said  report,  IMF  has  recommended  certain actions which inter-alia include the following:'Deposit taking by institutions that are  not  regulated  as  banks,  should  be prohibited, notwithstanding the very small volume of such deposits'. Section 76(1) of the Companies Act, 2013 (CA, 2013) read with rule 2(1)(e) of the Companies (Acceptance of Deposits) Rules, 2014 already provides that only an eligible public company, is allowed to raise deposits from the public. As such, only  a  public  company  having  a  net  worth  of  not  less  than  one  hundred  crore rupees or a turnover of not less than five hundred crore rupees may accept public deposits subject to compliance with the requirements provided in sub-section (2) of section 73 read with rule 3 of the Companies (Acceptance of Deposits) Rules, 2014 and proviso to section 76(1) of the CA, 2013. Under the CA, 2013, acceptance of deposits from public has been allowed subject to a more stringent regime as compared to the erstwhile Section 58A of the Companies Act, 1956. Section  75  provides  for  damages  for  fraud  and  Section  76A  makes  the contravention  of  section  73  or  section  76  of  the  Act  as  a  non-compoundable offence  by  providing  for  punishment  upto  seven  years  and  fine  for  officers  in default.  Section  164(2)(b)  of  CA,  2013  restricts  the  defaulter  director  to  be  reappointed as a director in defaulter company or appointment in other company for a  period  of  five  years  from  the  date  of  default  by  the  company  to  repay  the deposits. Thus,  it  is  felt  that  adequate  checks  and  safeguards  have  been  placed  on  the acceptance of deposits from the public by companies under the Companies Act, 2013 and the Companies  Acceptance  of  Deposits Rules, 2014. No  further checks/safeguards are considered necessary at this stage. Further, no such case has been noticed where companies are raising fixed deposits from the public, which often offer two-three percentage points higher interest rate than banks.

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