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26 April 2016

Nomination of director - Acceptance of deposits by Indian companies

The Reserve Bank of India has clarified that keeping deposits with an Indian company by persons resident outside India in accordance with Section 160 of the Companies Act, 2013 is a current account (payment) transaction and, as such, does not require any approval from Reserve Bank.

RBI A.P. (DIR Series) Circular No. 59, dated April 13, 2016 issued in this regard notes that while Foreign Exchange Management (Deposit) Regulations, 2016, announced on 1-4-2016, provide that no person resident in India shall accept any deposit from, or make any deposit with, a person resident outside India, Section 160 of the Companies Act, 2013 requires a person who intends to nominate himself or any other person as a director in an Indian company to place a deposit with the said company.

It is stated that all refunds of such deposits, arising in the event of selection of the person as director or getting more than twenty five percent votes, have to be treated similarly.