Public Deposits and Bonds

Beyond debentures, a company can raise short- and medium-term borrowed capital directly from the investing public by accepting public deposits. Under this method, the company invites members of the public to deposit their savings with it for a fixed period, paying them interest in return and issuing a deposit receipt as an acknowledgment of the debt — the terms and conditions on which the money has been accepted are stated on that very receipt. Public deposits usually run for a period of six months to thirty-six months, which places them squarely among the sources meeting a company's short-term financing requirements, and depending on the terms offered, they may be secured or unsecured.

Section 2(31) of the Companies Act, 2013 defines "deposit" broadly to include any receipt of money by a company by way of deposit, or loan, or in any other form, but expressly excludes such categories of amounts as may be prescribed in consultation with the Reserve Bank of India. The Companies (Acceptance of Deposits) Rules, 2014 spell out these exclusions in detail, and a Secretarial Practice student should be able to recognise the general kinds of receipts that are kept out of the meaning of "deposit" for this purpose — amounts received from the Central or a State Government; amounts received as a loan from a banking company; amounts received from a foreign government or international financial institutions; amounts received by a company from another company; amounts raised by issuing commercial paper or by issuing bonds; amounts received in trust; and amounts received by way of subscription to shares or debentures. The reasoning behind these exclusions is straightforward once stated plainly: the deposit-acceptance rules exist specifically to regulate and protect a company's dealings with the general investing public, so receipts that are already regulated some other way — an inter-company loan, a bank loan, a subscription to securities — are simply not treated as a "public deposit" for this particular purpose. …