Acceptance of Deposits

Avadhut (Querist) 08 September 2009 This query is : Resolved
Hi,
My name is Avadhut Nigudkar and my startup has acquired shop act license. I am going to start fund management activities where my firm will accept the funds and will give guaranteed annual returns to the investors.
I want to know is there any legal documents which I need to complete for this? Also,can I take insurance for this deposits with my firm ?
If I file an affidavit and sign the agreement with the investor,would that be enough as a security of the depsoit?

Thanks in advance.

Regards,
Avadhut Nigudkar
www.analytics.net.inriven

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A V Vishal (Expert) 08 September 2009
The kind of activity you intend to start attracts NBFC and RBI Regulations. It is not only unsafe, unwise but also illegal. You need to get a certificate of Registration from RBI to commence your business, else you may end up in all kinds of legal tangles. So, Advise is consult a Good CA or Advocate dealing with NBFC's before taking further step.

P.S: There are certain norms which you need to satisfy before approaching RBI, make sure you meet the eligibility before applying.riven

Raj Kumar Makkad (Expert) 08 September 2009
Agree with AV Vishal. all businesses wherein public money is accepted as an investment and wherein returns are assured to be returned, RBI is the exclusive regulatory authority. First of all form your firm either Partnership. Pvt. Ltd. company or Public Ltd Co; as per relevant rules by containing your whole plan/bye-laws, then get your company registered with RBI, then move specific application seeking approval to start your business and follow the entire guidelines of NBFC & RBI. One extra suggestion-if you have budget in crores, only then you start all this PUNGA otherwise leave all this tedious matter.riven

Rajneesh Madhok (Expert) 09 September 2009
The Reserve Bank of India had issued draft guidelines on fair practices code for non-banking finance companies (NBFCs).
In the draft code NBFCs has to convey in writing to the borrower the amount of loan sanctioned along with the terms and conditions including annualised rate of interest and method of application of interest and keep the acceptance of these terms and conditions by the borrower on its record.
NBFC has to give acknowldegement for receipt of all loan applications, with time frame when these loan applications will be disposed of.
The code provides that the borrowr would have to be given a notice of any change in terms and conditions including disbursement schedule, interest reates, service charges and perpayment charges.

So, first of all stress on disbursement of loans. The acceptance of deposits should not be stressed.

Rajneesh Madhok,
B-xxx/63, Nehru Nagar,
St. No. 2, Railway Road,
Phagwara-144401 (Pb)riven