Corporate and Other Laws · Acceptance of Deposits by Companies

Repayment of Deposits and Deposit Repayment Reserve Account

Updated 4 October 2026 · Fact-checked

A company accepting deposits must, on or before 30 April each year, put at least 20% of its deposits maturing during the following financial year into a separate deposit repayment reserve account in a scheduled bank. That money is only for repaying deposits. Deposits must be repaid with interest as agreed, and unsecured deposits must be labelled.

Understand Deposit Insurance, Repayment and Deposit Repayment Reserve Account

A deposit is money the company borrows from its members or the public and promises to repay with interest. Depositors are often ordinary people. The law therefore asks the company to show it can repay before it takes the money, and to keep some cash aside for repayment.

The main safety device is the deposit repayment reserve account (DRR account). Under section 73(2)(c), on or before 30 April each year the company must deposit a sum of not less than 20% of the amount of its deposits maturing during the following financial year. The money is kept in a scheduled bank in a separate bank account called the deposit repayment reserve account.

The base is only the deposits maturing during the following financial year, not total deposits. The financial year that ended on the 31 March just before the 30 April date is over, so the base is the financial year after it. For the deposit due by 30 April 2028, the base is deposits maturing during 2028-29, that is, from 1 April 2028 to 31 March 2029. Always take the base from the question's dates in this way.

Section 73(5) says the DRR account cannot be used for any purpose other than repayment of deposits.

The second device is security. Section 73(2)(f) lets the company provide security for repayment of the deposit and interest, including a charge on its assets. If the deposits are not secured, or only partly secured, they are unsecured deposits. The company must say so in every circular, form, advertisement or document relating to the invitation or acceptance of deposits. For a public company accepting deposits from persons other than members under section 76, a company accepting secured deposits must create a charge on its assets within thirty days of acceptance, for an amount not less than the deposits accepted. Such a company also needs a rating from a recognised credit rating agency, obtained every year during the tenure of the deposits.

The third part is repayment. Section 73(3) says every deposit must be repaid with interest as per the agreed terms. If the company fails, section 73(4) lets the depositor apply to the Tribunal for an order to pay the sum due, for loss or damage caused by the non-payment, and for other orders the Tribunal thinks fit.

Note that sections 73 and 76 contain no requirement about deposit insurance. Do not cite them for any insurance point. Tenure limits also come from the Companies (Acceptance of Deposits) Rules, 2014, not from sections 73 or 76.

Key rules to remember

DRR amount: Minimum DRR deposit = 20% × deposits maturing during the following financial year; Paid on or before 30 April each year (section 73(2)(c)). For 30 April 2028, the base is deposits maturing during 2028-29 (1 April 2028 to 31 March 2029). It is not total deposits.
Where the DRR money is kept: Separate bank account in a scheduled bank, called the deposit repayment reserve account; Not a general current account of the company.
Use of DRR account: Only for repayment of deposits; Section 73(5). No other use is allowed.
Unsecured deposit label: Deposits not secured, or partly secured = unsecured deposits; say so in every circular, form, advertisement and related document; Proviso to section 73(2)(f).
Charge for secured deposits (public company, section 76): Charge on assets ≥ amount of deposits accepted, created within 30 days of acceptance; Applies to a company accepting secured deposits from the public under section 76(1), second proviso.
Credit rating: Rating from a recognised credit rating agency, obtained every year during the tenure of deposits; Section 76(1), first proviso. Applies to a public company accepting deposits from persons other than members.
Repayment: Repay deposit with interest as per the agreement; Section 73(3). On failure, the depositor may apply to the Tribunal under section 73(4).
Tenure under the Deposit Rules: Normally not less than 6 months and not more than 36 months; Rule-based, with a limited short-term exception. Check the ICAI material for the exact exception limits.

How to solve Deposit Insurance, Repayment and Deposit Repayment Reserve Account questions

Most questions give a short fact pattern about a company's deposits and ask what it must do or whether it has complied. Use the same method each time.

1Identify the type of company and the source of the deposits: members only (section 73) or public (section 76, public company with prescribed net worth or turnover).
2Find the 30 April date in the question. The 20% is computed on deposits maturing during the following financial year, that is, the year after the one that ended on the 31 March before that date. For 30 April 2028, take deposits maturing during 2028-29 (1 April 2028 to 31 March 2029). Ignore those maturing in the year just ended or in 2029-30 and later years.
3Compute the DRR: 20% of those maturing deposits. Check the date, which is on or before 30 April, and that the money is in a separate account in a scheduled bank.
4Check the use of the DRR money. Anything other than repaying deposits breaches section 73(5).
5Check security: is the deposit secured, partly secured or unsecured? If not fully secured, it must be labelled as unsecured in every document. For section 76 secured deposits, check the charge within 30 days.
6Check repayment: has the company repaid with interest as agreed? If not, apply section 73(4): the depositor can approach the Tribunal.
7State the rule, apply it to the facts, and write a clear conclusion. For tenure points, state the rule from the Deposit Rules without a section number.

Quickest way: Rule-fact-conclusion in four lines

When to use it: Use this for MCQs and for short written answers when time is tight.

MCQ: look for the three fixed anchors: 20%, 30 April, deposits maturing during the following financial year. Wrong options usually change one of these, for example 15%, 31 March, total deposits, or maturities of the year just ended or of a later year.
MCQ: if an option says the DRR can be used for working capital or any company purpose, eliminate it. Section 73(5) allows repayment of deposits only.
Written: line 1 states the rule with the section number. Line 2 gives the figures and dates from the question. Line 3 applies the rule to the facts. Line 4 gives the conclusion in one sentence.
Show the calculation 20% × amount separately, so you earn the working mark even if the conclusion is wrong.

Common mistakes in Deposit Insurance, Repayment and Deposit Repayment Reserve Account

Computing 20% on total deposits outstanding instead of deposits maturing in the following financial year.
Students remember '20% of deposits' and skip the words 'maturing during the following financial year'.
Fix: Underline 'maturing' and 'following financial year' in the question. Take only those deposits that fall due in the following financial year, for example 2028-29 for a 30 April 2028 deadline.
Using deposits maturing in the year that has just ended, or in later years, as the base.
Students pick a year loosely instead of fixing the base from the date in the question.
Fix: The base is the financial year following the one that ended on the 31 March before the 30 April date. For 30 April 2028, it is 2028-29. Do not use 2027-28 or 2029-30.
Writing the deadline as 31 March.
31 March is the usual year-end date, so it comes to mind first.
Fix: The deposit in the DRR account is due on or before 30 April each year under section 73(2)(c). 31 March is only the end of the financial year used for the base.
Saying the DRR money can be used for the company's urgent needs.
Students treat it as a reserve like any other general reserve.
Fix: Section 73(5): the account cannot be used for any purpose other than repayment of deposits.
Assuming deposits must always be secured.
Students mix up the rule on security with the compulsory label for unsecured deposits.
Fix: Security is optional under section 73(2)(f) ('if any'). If deposits are unsecured or partly secured, they must be quoted as unsecured in every circular, form, advertisement and related document.
Applying section 76 requirements to every company.
Both sections deal with deposits, so the rules merge in memory.
Fix: Section 73 covers deposits from members. Section 76 allows certain public companies, with prescribed net worth or turnover, to accept deposits from persons other than members, subject to credit rating and a charge for secured deposits.
Citing a section number for the tenure limits.
Students assume every point sits in sections 73 to 76.
Fix: Tenure limits come from the Deposit Rules. State the rule in words and do not invent a section number.

Worked examples

Example 1

Sunrise Ltd, a company that has accepted deposits from its members, has deposits of ₹80,00,000 maturing during 2028-29 and ₹60,00,000 maturing during 2029-30. What amount must it place in the deposit repayment reserve account by 30 April 2028, and where must it keep it?

Show the solution

Rule: under section 73(2)(c), on or before 30 April each year the company must deposit not less than 20% of the deposits maturing during the following financial year.
The date in question is 30 April 2028. The following financial year is 2028-29 (1 April 2028 to 31 March 2029).
The deposits maturing in 2028-29 are ₹80,00,000. The ₹60,00,000 maturing in 2029-30 is not part of this computation. It falls in a later year.
Working: 20% × ₹80,00,000 = ₹16,00,000.
Date: the sum must be deposited on or before 30 April 2028.
Place: the money must be kept in a scheduled bank in a separate account called the deposit repayment reserve account.

Answer: Sunrise Ltd must deposit at least ₹16,00,000 in the deposit repayment reserve account, in a scheduled bank, on or before 30 April 2028.

Example 2

Bharat Ltd has kept ₹10,00,000 in its deposit repayment reserve account. Facing a shortage of working capital, the Board proposes to use this amount to pay suppliers. Some depositors have not been paid on the due date. Advise the company and the depositors.

Show the solution

Rule on use: section 73(5) states that the deposit repayment reserve account shall not be used for any purpose other than repayment of deposits.
Application: paying suppliers is not repayment of deposits. The Board's proposal therefore contravenes section 73(5).
Rule on repayment: under section 73(3) every deposit must be repaid with interest as per the agreed terms. The unpaid depositors are in a position where the company has failed under that sub-section.
Remedy: under section 73(4), a depositor can apply to the Tribunal for an order directing the company to pay the sum due, for any loss or damage from non-payment, and for other orders the Tribunal thinks fit.
Practical advice: the ₹10,00,000 should be used to repay the depositors whose deposits are due.

Answer: Bharat Ltd cannot use the DRR money to pay suppliers; it can only be used to repay deposits, so it should pay the overdue depositors. The depositors may apply to the Tribunal under section 73(4) if the company still does not pay.

Exam tips

Memorise the three anchors of the DRR rule: 20%, 30 April, deposits maturing during the following financial year. Most MCQs test one of them.
Work out the base year from the dates: it is the financial year after the one that ended on the 31 March before the 30 April date. For 30 April 2028, that is 2028-29. Write that year down before you compute.
In a case study, say 'section 73(5)' when the DRR money is used for something other than repayment. It is a quick source of a mark.
When asked about unsecured deposits, mention the labelling requirement in every circular, form, advertisement and document. Examiners reward the labelling point.
Keep tenure points as rule statements without section numbers, unless the question gives the section. Check the latest ICAI amendments for the exam you are writing.
Always show the 20% working as a separate line with the rupee figure in Indian grouping, for example ₹16,00,000.

Practice questions from Acceptance of Deposits by Companies

Deposit Insurance, Repayment and Deposit Repayment Reserve Account: frequently asked questions

What is the 20% rule for the deposit repayment reserve account?

On or before 30 April each year, a company must deposit at least 20% of the deposits maturing during the following financial year in a separate account in a scheduled bank. This is section 73(2)(c). The account is called the deposit repayment reserve account.

Which financial year is the 'following financial year' for the 20% base?

Section 73(2)(c) says the deposits maturing during the following financial year. This is the year after the one that ended on the 31 March before the 30 April date. So for 30 April 2028, the base is deposits maturing from 1 April 2028 to 31 March 2029, that is 2028-29.

Can a company withdraw money from the deposit repayment reserve account for other needs?

No. Section 73(5) says the account cannot be used for any purpose other than repayment of deposits. Using it for expenses or working capital is a contravention.

Is security compulsory for deposits?

No. Section 73(2)(f) refers to security 'if any'. If the deposits are not secured, or only partly secured, they are unsecured deposits, and the company must say so in every circular, form, advertisement or related document.

What can a depositor do if the company does not repay?

Under section 73(4), the depositor can apply to the Tribunal for an order directing the company to pay the sum due. The depositor can also ask for compensation for any loss or damage from non-payment and for other orders the Tribunal thinks fit.