Sample this, HDFC Bank is offering 8.75% for fixed deposits across tenures of nine-months-17-days to 1 year, 1-year-17-days to 2 years and 2 years-17-days to 3 years. At the same time, HDFC is offering 9.25% for one, two and three years for a company deposit scheme. Difference = 50 basis points.
Similarly, ICICI Bank is offering 7.75% for a 290-days-to-less-than-one-year fixed deposit, 9% for 390-days-to-two-years and 8.75 for anywhere between two-years -one-day-upto-five-years. However, ICICI Home Finance is offering 9% for one and three years and 9.25% for two years for company deposits. Difference = 25 to 125 basis points.
No doubt that company deposits look more lucrative. But it carries higher risk also, than bank deposits. If a bank goes belly up, there is an insurance of Rs 1 lakh across deposit types that you may get. But if a company defaults you may be left in a lurch. A good case in point is the recent default on deposit payment by a couple of the Yash Birla Group companies. Where deposits to the tune of Rs 214 crore has not been paid to more than 8,000 investors.
Says Ramesh Vaidyanathan, managing partner at Advaya Legal, "Investors can file complaint under Maharashtra Protection of Interests of Depositors Act. This Act allows arrest and attachment of properties to protect depositors/investors."
Company deposits can be governed by different authorities. Sometimes deposits come under the Collective Investment Scheme (CIS) as declared by the Securities and Exchange Board of India (Sebi). If you have invested in a CIS, you can file a complaint with Sebi. However, Sebi does not have the control over CIS at present. It was the authority till January 2014.
Deposit schemes of manufacturing companies fall under the purview of the Ministry of Corporate Affairs (MCA). And if an NBFC has collected the deposit, the Reserve Bank of India (RBI) is the regulator.
"But that does not matter always and you can't expect investors to know the right authority and approach it. Addressing your grievance to MCA is the best option along with the Registrar of Companies (RoC). And in case of listed companies Sebi can also be addressed in the complaint," suggests Vaidyanathan. You can start with getting in touch with the company when you miss the payment.
Says Sajid Mohammed, partner of PDS Associates that unfortunately there is no sure short method to get the deposit money back. All a depositor can do is put pressure on the company to pay up. Company deposits are unsecured instruments hence such depositors are last in the order of payment in case the company defaults.
Despite this you have the following options to get your grievance heard with authorities. You can file a complaint with the MCA online also. This way you can track the complaint. Or, file a complaint with the Company Law Board (CLB) or file a civil suit. The RBI Act 1934 empowers CLB to order repayment of deposits accepted by an NBFC. You need to submit Form 4 in duplicate along with a photocopy of the deposit receipt issued by the company and a demand draft of Rs 50 at the CLB benches in New Delhi, Kolkata, Mumbai or Chennai.
Additionally, an offence in connection with acceptance of deposits are cognisable under the Code of Criminal Procedure 1973. You can also knock the consumer court's door under Section 12 of the Consumer Protection Act. Include relevant papers substantiating your claim.
Depositors can also file a suit under Section 245 (not notified yet) of the Companies Act 2013 before the National Company Law Tribunal.
That's why opt for deposits of companies that have good rating. Like HDFC and ICICI Home Finance have good rating whereas United Spirits' deposit scheme is considered risky. According to Sebi these schemes have to be compulsorily rated by an agency, especially deposits of NBFCs.