The government is examining a proposal to restrict manufacturing companies from accessing the market for deposits.
Banks have proposed that Section 58 A of the Companies Act, 1956, be amended so that companies other than banks and non-banking financial companies are prohibited from accepting deposits. The proposal was mooted by ICICI Bank at a recent discussion with the department of company affairs. The bank cited the examples of other countries, where only banks and finance companies were permitted to raise deposits.
Industry associations are, however, peeved at the proposal, and have asked the government to consider the implications for corporate houses. They said a number of smaller companies were tapping domestic deposits as an important source of funds.
According to the Centre for Monitoring Indian Economy, the share of corporate funding from sources other than banks, institutions and bonds has fallen from 45 per cent in 1992 to 19 per cent in 2001.
A section in the department of company affairs is also in favour of the current system.
