New Delhi, Oct. 22 (PTI): To safeguard investors from fraudulent money collection schemes, the government today proposed mandatory insurance cover for public deposits garnered by companies and a hefty penalty of up to 18 per cent annual interest for defaulters.
The premium for the deposit insurance cover would be paid by the companies and a penalty at an annualised interest rate of 15 per cent would be slapped on those which do not provide insurance to their depositors.
The proposed measures, which form part of the draft rules for the new Companies Act, also bar companies from promising huge returns and hefty agent commissions in excess of the prevailing rates prescribed by the RBI for such deposits.
Releasing the draft rules, the corporate affairs ministry said that action would be initiated against companies that fail to comply with the new rules — Regulations for Acceptance of Deposits by Companies.
Besides, any violating company and each of its officers and other persons, who could be in default, can be fined Rs 10,000 with a further fine of Rs 1,000 for every day of contravention for continuing default.
Under the deposit insurance scheme, the companies would need to enter into a contract to insure the total principal amount as also the promised interest component for the depositors. However, premium to be paid for such insurance cannot be recovered from the depositor and the money has to be paid by the company itself.
All deposit-taking companies would need to maintain a deposit repayment reserve account with a scheduled bank and this account would need to have at least 15 per cent of the total amount of deposits.
The National Financial Reporting Authority (NFRA), the proposed apex body for accounting and auditing standards, will have powers to probe and review audits of companies, including those which have securities listed outside India.
The NFRA would be a quasi-judicial body under the new Companies Act. It would have the responsibility of monitoring, compliance review and overseeing quality of service, enforcement and standard setting with regard to accounting and auditing standards.