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ARTICLE · 04 JULY 2016

MCA Notifies Amendment To Deposit Rules – Unsecured Bonds Finally Not A Deposit

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On 29 June 2016 the Ministry of Corporate Affairs notified the Companies (Acceptance of Deposits) Amendment Rules, 2016 (Amendment) amending the Companies (Acceptance of Deposits) Rules, 2014.

IndiaFinance and Banking
Sudhir Bassi
Sudhir Bassi
Ashwin Bishnoi
Ashwin Bishnoi
Manisha Shroff
Manisha Shroff
Rupsa Mitra
Rupsa Mitra
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Background

On 29 June 2016 the Ministry of Corporate Affairs notified the Companies (Acceptance of Deposits) Amendment Rules, 2016 (Amendment) amending the Companies (Acceptance of Deposits) Rules, 2014 (Deposit Rules). The Deposit Rules principally define the treatment of certain borrowings as public "deposits" thereby attracting stricter norms. The Deposit Rules provide certain important exceptions to public "deposits" thereby allowing issuers to raise loans and issue non-convertible securities in the ordinary course of business without complying with the strict requirements of the Deposit Rules. The Amendment makes key changes to the exceptions from "deposit" which are likely to have a significant impact on the Indian bond market. We discuss these below.

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