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CA Intermediate · Corporate and Other Laws · Acceptance of Deposits by Companies

Sundaram Auto Ltd, a public company, accepted deposits from the public. The company did not create the deposit repayment reserve account before the prescribed date. Which statement correctly states the requirement relating to the deposit repayment reserve?

The company must deposit at least 20% of the amount of deposits maturing during the following financial year, in a separate scheduled bank account, on or before 30 April each year. This account is used only for repaying deposits. A charge on assets does not remove the duty.

  1. AThe company must deposit at least 20% of deposits maturing during the following financial year, in a separate bank account, on or before 30 April each yearCorrect
  2. BThe company must deposit at least 15% of deposits maturing during the following financial year, by 31 March each year
  3. CThe company must deposit 100% of deposits maturing in the following year, before 30 June
  4. DNo such reserve is required if the deposits are secured by a charge on assets

Explanation

A company accepting deposits must, on or before 30 April each year, deposit in a separate bank account at least 20% of the deposits maturing during the following financial year, and the next year's period ending 31 March. The amount is kept in a scheduled bank and used only for repayment of deposits. The 15% figure and the 31 March date are wrong. Security by a charge does not remove the requirement.

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