Chapter V - Acceptance of Deposits by Companies

Section 73

Section 73: prohibition on public deposits and member deposits

No company may invite, accept or renew deposits from the public except in the manner provided in Chapter V. A company may accept deposits from its members only on the conditions in section 73(2) and the prescribed rules.

Official text

On this page

Need advice on Section 73?

This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.

Statutory text

Bare law

(1) On and after the commencement of this Act, no company shall invite, accept or renew deposits under this Act from the public except in a manner provided under this Chapter: Provided that nothing in this sub-section shall apply to a banking company and non-banking financial company as defined in the Reserve Bank of India Act, 1934 and to such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf.

(2) A company may, subject to the passing of a resolution in general meeting and subject to such rules as may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members on such terms and conditions, including the provision of security, if any, or for the repayment of such deposits with interest, as may be agreed upon between the company and its members, subject to the fulfilment of the following conditions, namely:— (a) issuance of a circular to its members including therein a statement showing the financial position of the company, the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the company and such other particulars in such form and in such manner as may be prescribed; (b) filing a copy of the circular along with such statement with the Registrar within thirty days before the date of issue of the circular; (c) depositing, on or before the thirtieth day of April each year, such sum which shall not be less than twenty per cent. of the amount of its deposits maturing during the following financial year and kept in a scheduled bank in a separate bank account to be called deposit repayment reserve account; (e) certifying that the company has not 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 and where a default had occurred, the company made good the default and a period of five years had lapsed since the date of making good the default; and (f) providing security, if any for the due repayment of the amount of deposit or the interest thereon including the creation of such charge on the property or assets of the company: Provided that in case where a company does not secure the deposits or secures such deposits partially, then, the deposits shall be termed as “unsecured deposits” and shall be so quoted in every circular, form, advertisement or in any document related to invitation or acceptance of deposits.

(3) Every deposit accepted by a company under sub-section (2) shall be repaid with interest in accordance with the terms and conditions of the agreement referred to in that sub-section.

(4) Where a company fails to repay the deposit or part thereof or any interest thereon under sub-section (3), the depositor concerned may apply to the Tribunal for an order directing the company to pay the sum due or for any loss or damage incurred by him as a result of such non-payment and for such other orders as the Tribunal may deem fit.

(5) The deposit repayment reserve account referred to in clause (c) of sub-section (2) shall not be used by the company for any purpose other than repayment of deposits.

Introduction

Banking companies, non-banking financial companies as defined in the Reserve Bank of India Act, 1934, and companies specified by the Central Government after consulting the Reserve Bank are outside section 73(1).

The rules made in consultation with the Reserve Bank are the Companies (Acceptance of Deposits) Rules, 2014 (G.S.R. 256(E), in force from 1 April 2014), as amended. They and section 2(31) decide what counts as a "deposit".

Key takeaways

Public deposits barred

Only the manner in Chapter V permits inviting, accepting or renewing deposits from the public.

Member deposits

Need a general meeting resolution, a circular filed with the Registrar, a deposit repayment reserve, a no-default certificate and, if offered, security.

20 per cent. reserve

By 30 April each year, at least twenty per cent. of deposits maturing in the following financial year must be kept in a separate scheduled bank account.

Who is covered

Section 73(1) applies to every company other than a banking company, a non-banking financial company as defined in the Reserve Bank of India Act, 1934, and any other company the Central Government specifies after consultation with the Reserve Bank of India. Check section 2(31) and the Deposit Rules to see whether a receipt is a deposit at all.

Conditions for deposits from members

A company may accept deposits from members, after a resolution in general meeting and subject to the rules, on agreed terms, if it: (a) issues a circular to members with a statement of its financial position, credit rating, total number of depositors and amount due on previous deposits, and other prescribed particulars; (b) files a copy of the circular and statement with the Registrar within thirty days before the date of issue of the circular; (c) deposits, on or before 30 April each year, at least twenty per cent. of the deposits maturing in the following financial year in a separate scheduled bank account called the deposit repayment reserve account; (e) certifies that it has not defaulted in repaying deposits or interest, or, where a default occurred, that it made good the default and five years have lapsed since; and (f) provides security, if any. Unsecured or partly secured deposits must be described as "unsecured deposits" in every circular, form, advertisement or related document.

Repayment and the reserve account

Deposits accepted under sub-section (2) must be repaid with interest as agreed (sub-section (3)). A depositor who is not repaid may apply to the Tribunal for an order to pay the sum due, for loss or damage, and for other orders (sub-section (4)). The deposit repayment reserve account may be used only to repay deposits (sub-section (5)).

Private companies

Under serial number 6 of G.S.R. 464(E), as substituted by G.S.R. 583(E) dated 13 June 2017, clauses (a) to (e) of section 73(2) do not apply to a private company that (A) accepts from members monies not exceeding one hundred per cent. of the aggregate of paid-up share capital, free reserves and securities premium account; or (B) is a start-up, for five years from incorporation; or (C) is not an associate or subsidiary of another company, has borrowings from banks, financial institutions or bodies corporate below twice its paid-up share capital or fifty crore rupees, whichever is lower, and has not defaulted on those borrowings. Such a company must file details of monies accepted with the Registrar as specified, and paragraph 2A requires that it is not in default in filing financial statements or annual returns. Check for any later amendment.

Amendments and commencement

Section 73 came into force on 1 April 2014 under S.O. 902(E). Section 15 of the Companies (Amendment) Act, 2017 substituted clause (c) (raising the reserve from fifteen to twenty per cent. and fixing the 30 April date), omitted clause (d) on deposit insurance, and allowed a past default to be cured under clause (e) after five years, effective 15 August 2018 (S.O. 3300(E)).

Practical preparation

Classify every receipt against section 2(31) and the Deposit Rules; for member deposits, pass the general meeting resolution, prepare and file the circular, fund the deposit repayment reserve by 30 April, certify default history and arrange any security; for private companies, test the G.S.R. 464(E) conditions; file the returns required by the Deposit Rules.

Practical checklist

Do

Review loans and advances received for deposit classification at each year end.
Fund the deposit repayment reserve account before 30 April each year.

Avoid

Do not invite deposits from the public unless Chapter V permits it.
Do not use the reserve account for anything other than repaying deposits.
Do not describe partly secured deposits as secured.

Illustrative example

Hypothetical: member deposit scheme

An unlisted public company proposes to accept deposits from its members.

Approve
Pass the general meeting resolution and prepare the circular with the required statement.
File
File the circular with the Registrar within thirty days before its issue.
Reserve
Deposit twenty per cent. of next year’s maturities in the reserve account by 30 April.

Outcome

The deposits are accepted under section 73(2); contravention would attract section 76A.

Glossary

Deposit: Receipt of money by way of deposit or loan or in any other form, subject to the exclusions in section 2(31) and the rules.
Deposit repayment reserve account: A separate scheduled bank account holding at least twenty per cent. of deposits maturing in the next financial year.

Frequently asked questions

Can a private company take deposits from its members?

Yes, under section 73(2) and the rules. G.S.R. 464(E), as amended in 2017, exempts qualifying private companies from clauses (a) to (e), subject to its conditions and a filing requirement.

What is the deposit repayment reserve?

At least twenty per cent. of deposits maturing in the following financial year, deposited by 30 April each year in a separate scheduled bank account.

What can a depositor do if not repaid?

Apply to the Tribunal under section 73(4) for payment of the sum due and for loss or damage.

Need help applying this provision to your situation?

Contact Bizeneed

Last updated 11 October 2026

PreviousSection 72 NextSection 74