Corporate and Other Laws · Acceptance of Deposits by Companies

Eligibility and Conditions for Accepting Deposits by Companies

Updated 4 October 2026 · Fact-checked

A company may not invite or accept deposits from the public except as the Act allows. Under Section 73 it can take deposits from members after a general meeting resolution and conditions such as a circular, filing, a deposit repayment reserve and no default. Under Section 76, only eligible public companies may take deposits from the public.

Understand Eligibility and Conditions for Accepting Deposits

A deposit is money a company receives and must repay later, usually with interest. The law restricts this because ordinary people can lose savings if a company fails. So the Companies Act, 2013 starts with a ban and then allows deposits only on strict terms.

Section 73(1) is the ban. No company can invite, accept or renew deposits from the public except as the Chapter provides. Banking companies and NBFCs under the RBI Act, 1934 are outside it, and so are other companies the Central Government specifies after consulting the RBI.

Section 73(2) is the first route: deposits from members. The company needs a resolution in general meeting and must follow the Rules made in consultation with the RBI. It must also meet these conditions: (a) issue a circular to members with the financial position, credit rating, number of depositors and amount due on earlier deposits; (b) file a copy of the circular with the Registrar within thirty days before the date of issue of the circular (that is, before issue, inside that 30-day window); (c) deposit by 30 April each year at least 20% of deposits maturing in the next financial year in a separate account with a scheduled bank, called the deposit repayment reserve account; (e) certify that it has not defaulted in repaying deposits or paying interest, or, if it did, that it made good the default and five years have passed since; and (f) provide security, if any. If deposits are unsecured, every circular, form or advertisement must say so.

Section 76 is the second route: deposits from persons other than members. Only a public company with the prescribed net worth or turnover can use it. It must comply with Section 73(2), obtain a credit rating from a recognised agency for every year of the deposit's tenure, and, for secured deposits, create a charge on its assets within thirty days of acceptance for at least the amount of the deposits. The Rules call such a company an eligible company.

The Rules (Rule 3 of the Companies (Acceptance of Deposits) Rules, 2014) add the numbers: the limit on the amount, the tenure, and the type of resolution. The figures of ₹100 crore, ₹500 crore, 10% and 35% in this page come from the Rules, not from the Act text. Verify them against the current Companies (Acceptance of Deposits) Rules, 2014 before the exam. The Act sets the structure and the Rules fill in the details.

Key rules to remember

Basic rule (Section 73(1)): No deposits from the public unless the Chapter allows it; Banking companies, NBFCs (as defined in the RBI Act, 1934) and companies specified by the Central Government are outside this prohibition.
Deposits from members (Section 73(2)): Resolution in general meeting + Rules + conditions (a), (b), (c), (e), (f); Remember the five conditions: circular, filing with the Registrar within 30 days before issue, DRA, no-default certificate, security.
Deposit repayment reserve (Section 73(2)(c)): DRA ≥ 20% × deposits maturing in the next financial year, deposited on or before 30 April; Kept in a separate account with a scheduled bank. Section 73(5): it can be used only to repay deposits.
Public deposits (Section 76): Public company with prescribed net worth or turnover + Section 73(2) compliance + annual credit rating; The Act says only 'prescribed' net worth or turnover. The Rules-based figures (net worth of at least ₹100 crore or turnover of at least ₹500 crore, and a special resolution filed with the Registrar before inviting the public) are to be verified against the current Companies (Acceptance of Deposits) Rules, 2014.
Charge for secured deposits (Section 76(1)): Charge created within 30 days of acceptance, for an amount ≥ the deposits accepted; Applies to companies accepting secured deposits from the public.
Amount limit (Rule 3): Non-eligible company: members' deposits including outstanding ≤ 10% of (paid-up share capital + free reserves + securities premium). Eligible company: members and public together ≤ 35% of the same base; Rules-based figures, not in the Act text. Verify the 10% and 35% limits against the current Companies (Acceptance of Deposits) Rules, 2014. The limit includes deposits already outstanding.

How to solve Eligibility and Conditions for Accepting Deposits questions

Use this order for any question on who may accept deposits, how much, and on what conditions.

1Identify the company type: banking company or NBFC, other private company, public company, or eligible company. Check for an exemption first.
2Identify the depositor: member or non-member (public). Members go through Section 73. Non-members go through Section 76.
3For public deposits, test eligibility: public company, prescribed net worth or turnover (under the Rules, net worth of at least ₹100 crore or turnover of at least ₹500 crore; verify against the current Rules), and a special resolution filed with the Registrar.
4List the approval needed: a resolution in general meeting for members, a special resolution for an eligible company inviting the public.
5Check the conditions one by one: circular, filing within 30 days before issue, DRA of 20% by 30 April, no-default certificate, security and its disclosure, and credit rating for public deposits.
6Compute the limit: aggregate of paid-up share capital, free reserves and securities premium, then the percentage (10% or 35% under Rule 3, verify against the current Rules), then deduct deposits already outstanding.
7Conclude: say whether the acceptance is valid, and name the consequence of any gap, such as a Tribunal order under Section 73(4) if repayment fails.

Quickest way: Three-question check for MCQs and written answers

When to use it: Use it when the question gives a company profile and asks if it can accept deposits, or how much.

Ask 1: Who is the depositor? Member means Section 73. Non-member means Section 76 and only a public company with the prescribed net worth or turnover.
Ask 2: Which approval is missing? Check the resolution in general meeting, the special resolution for eligible companies, and the filing with the Registrar.
Ask 3: What is the limit? Compute the base (paid-up capital + free reserves + securities premium), apply 10% or 35% as the Rules provide, and subtract outstanding deposits.
In MCQs, eliminate options that ignore the member/public split or the outstanding deposits. There is no negative marking, so always attempt every MCQ.
In written answers, use provision, facts, conclusion: state the section, apply the numbers, then conclude in one line. Show the limit calculation in separate lines to earn step marks.

Common mistakes in Eligibility and Conditions for Accepting Deposits

Saying any company can invite deposits from the public if it passes a resolution.
Students read Section 73(2) on members and forget that Section 73(1) bans public deposits.
Fix: Remember the order: ban first, then the member route, then Section 76 for eligible public companies only.
Applying the percentage limit to the new deposit alone and ignoring deposits already outstanding.
The numerical sums look like simple percentage questions.
Fix: Compute the limit, then subtract outstanding deposits. The Rules count the new deposit together with those outstanding.
Taking the base as paid-up share capital and free reserves only.
Older material used that base before the 2018 amendments.
Fix: Use paid-up share capital, free reserves and securities premium account together, as the Rules specify.
Forgetting the deposit repayment reserve details: the percentage, the date or the use.
Students memorise '20%' and nothing else.
Fix: Write all parts: at least 20% of deposits maturing in the next financial year, on or before 30 April, in a separate account with a scheduled bank, used only to repay deposits.
Writing that the circular is filed after it is issued.
Students assume filing is a post-issue formality.
Fix: The Act requires filing a copy of the circular with the Registrar within thirty days before the date of issue. So filing is before issue, inside that window. Do not write it as an exact fixed lead time of thirty days.
Missing the no-default condition and the five-year gap.
Section 73(2)(e) is long and students read only the first line.
Fix: State: no default in repaying deposits or paying interest. If there was a default, it must be made good and five years must have passed since.

Worked examples

Example 1

Alpha Ltd, a public company that is not an eligible company, has paid-up share capital of ₹50 crore, free reserves of ₹30 crore and securities premium of ₹20 crore. Deposits from members already outstanding are ₹6 crore. Can it accept a fresh deposit of ₹5 crore from members, subject to the other conditions being met? Use the 10% limit.

Show the solution

Provision: Section 73(2) allows deposits from members, with a general meeting resolution and the Rules. Under Rule 3 (verify the 10% figure against the current Rules), a company that is not an eligible company may hold members' deposits up to 10% of paid-up share capital, free reserves and securities premium, including those outstanding.
Base = ₹50 crore + ₹30 crore + ₹20 crore = ₹100 crore.
Limit = 10% × ₹100 crore = ₹10 crore.
Outstanding deposits = ₹6 crore, so room left = ₹10 crore − ₹6 crore = ₹4 crore.
The proposed ₹5 crore is more than ₹4 crore. Total would be ₹11 crore, above the ₹10 crore limit.

Answer: No. The company can accept at most ₹4 crore more from members. A fresh deposit of ₹5 crore would take total deposits to ₹11 crore, above the ₹10 crore limit.

Example 2

Beta Ltd is a public company with net worth of ₹120 crore. Its paid-up share capital, free reserves and securities premium together total ₹400 crore. It has not passed any special resolution on deposits. It wants to invite deposits from the public. Examine whether it can, and state the limit if it can. Use the Rules-based figures given in the steps.

Show the solution

Provision: Section 76 allows a public company with the prescribed net worth or turnover to accept deposits from persons other than members, subject to Section 73(2) compliance.
Facts: Beta Ltd is a public company with net worth of ₹120 crore. The Act only says 'prescribed'. Under the Rules, as stated in this guide (verify against the current Companies (Acceptance of Deposits) Rules, 2014), net worth of at least ₹100 crore meets the eligibility test (turnover of at least ₹500 crore would be the alternative). So Beta Ltd meets the size test.
Gap: the Rules also require prior consent in general meeting by special resolution, filed with the Registrar before inviting the public. Beta Ltd has not done this, so it is not yet an eligible company.
Once it passes and files the special resolution, it must also issue a circular, file a copy with the Registrar within thirty days before the date of issue, hold the DRA, give the no-default certificate and obtain a credit rating every year of the deposit's tenure.
Limit after becoming eligible: 35% × ₹400 crore = ₹140 crore for members and public together, including deposits already outstanding (Rules-based figure; verify against the current Rules).

Answer: Not yet. Beta Ltd meets the size test but has not passed and filed the special resolution. After doing so and complying with Section 73(2) and the rating requirement, it can accept deposits up to ₹140 crore in total, including those already outstanding, on the Rules-based 35% limit.

Exam tips

Write the section number with each condition: Section 73(1) for the ban, Section 73(2) for members, Section 76 for the public.
In numerical questions, always state the base, the percentage, the outstanding deposits and the balance as separate lines. Step marks depend on it.
Learn the five conditions of Section 73(2) as a list: circular, filing within 30 days before issue, DRA, no-default certificate, security. MCQs often change one detail.
In case-study answers, always name the type of company first. An exempt company, such as a banking company, changes the whole answer.
Use Section 73(4) and 73(5) at the end of an answer: the depositor can apply to the Tribunal if repayment fails, and the DRA can be used only to repay deposits.
The ₹100 crore, ₹500 crore, 10% and 35% figures come from the Rules. Check them against the current Companies (Acceptance of Deposits) Rules, 2014 before the exam.

Practice questions from Acceptance of Deposits by Companies

Eligibility and Conditions for Accepting Deposits: frequently asked questions

What is the difference between deposits from members and public deposits?

Deposits from members are covered by Section 73(2) and need a resolution in general meeting plus compliance with the Rules. Deposits from persons other than members fall under Section 76 and are open only to public companies with the prescribed net worth or turnover. They must also obtain a credit rating for every year of the deposit's tenure.

Who is an eligible company?

Under the Rules, an eligible company is a public company with net worth of at least ₹100 crore or turnover of at least ₹500 crore. It must also have passed a special resolution in general meeting and filed it with the Registrar before inviting deposits from the public. These figures are Rules-based, so verify them against the current Companies (Acceptance of Deposits) Rules, 2014.

What is the limit on accepting deposits?

Under Rule 3, a company that is not an eligible company can hold deposits from members up to 10% of its paid-up share capital, free reserves and securities premium. An eligible company can hold deposits from members and the public up to 35% of the same base. Both limits include deposits already outstanding. These are Rules-based figures, so verify them against the current Rules for any amendment.

How much must a company keep in the deposit repayment reserve account?

Under Section 73(2)(c), it must deposit on or before 30 April each year at least 20% of the deposits maturing in the following financial year. The money sits in a separate account with a scheduled bank. Section 73(5) says it can be used only to repay deposits.

Does Section 73 apply to banks and NBFCs?

No. The proviso to Section 73(1) excludes banking companies and non-banking financial companies as defined in the RBI Act, 1934. It also excludes any other company the Central Government specifies after consulting the RBI.