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Loans And Deposits

sumit jain (student) (49 Points)

28 November 2018

Why there are so much restrictions on Quantum of loans and deposits accepted by company ?

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Aditi Ahuja (Financial Advisor) (106 Points)
Replied 28 November 2018

This is because of fraud in market. To avoid this RBI has published some guidelines which every bank and even NBFCs need to follow. The problem that banks face is mostly with the unsecured loan like personal loan, education loan and others.

So in these cases banks strictly follow the guidelines introduced by RBI.

kapil gupta (217 Points)
Replied 28 November 2018

Restrictions are made for limiting the powers of board of directors who in case of missing restrictions will borrow the funds on account of company and misuse that funds and use it for diversion and siphoning which will ultimately adversly affect the interest of stakeholdes(investors,employees,society etc).
So for making sure this wont happen restrictions are added in Companies Act,2013
Section180(1)(c) allow directors to borrow freely uptp 100% of (paid up share cap. + free reserves+ sec. premium ) and beyond fbat shareholders prior approval shall be recquried by means of Spcl resolution.
Chapter 5th of Companies act,2013 (acceptance of deposits) has made stringent provisions for preventing breach of duty and fraud on account of companies and officers.
Thanks

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