Public deposits mandated to have Insurance cover
- Every company under Sec 73 (2) & every other eligible company inviting deposits is expected to enter into a contract providing for deposit insurance at least 30 days before the issue of circular or advertisement, as the case may be, as specified in Sec 73 (2)(d) of the Act. The Corporate Affairs Ministry has warned action against defaulters.
- Manufacturing companies fear that this may deprive them of a major source of funding.
- The depositor is entitled to repayment of principal amount of deposits along with interest by the insurer upto the aggregate monetary ceiling specified in the deposit insurance contract, in case the company defaults in repayment of principal & interest.
- For deposits exceeding Rs. 20,000, the contract shall provide for payment of an amount not less than Rs. 20,000; and for deposits less than this, the contract shall provide for payment of full deposit.
- But since no general insurance for public deposits are available as yet, companies may not be under compulsion to renew deposits or accept fresh deposits.
- Insurance to Depositors
- New Companies Act