## Premature Repayment of Deposits — Rule 15

### General Rule

No premature repayment is allowed within 6 months from the date of acceptance of the deposit.

### After 6 months

If the depositor requests repayment, the company may repay, but at a reduced rate of interest computed as follows:

Interest payable shall be reduced by 1% from the rate which the company would have paid had the deposit been accepted for the period for which it has actually run.

### Important conditions

Premature repayment is at the option of the company (subject to the rule).
The reduced rate applies for the period for which the deposit has actually run.
A company can prematurely repay a deposit within 6 months only on grounds of financial hardship or extraordinary circumstances, provided the Board approves and no interest is paid for such repayment.

### Joint depositors / Special cases

For deposits held by NRI / FCNR or joint holders, premature repayment is subject to limits in the deposit contract.
Brokerage / commission shall not be paid in respect of the period for which deposits are prematurely repaid.

Worked example

### Example 1

Example: Mr. X deposited ₹1,00,000 with PQR Ltd. for 3 years @ 10% p.a. After 18 months he requests premature repayment. Had the deposit been accepted originally for 18 months, the company would have paid 8% p.a. At what rate must PQR Ltd. pay interest on premature repayment?

Answer: Since the deposit has actually run for 18 months, the applicable rate is the rate for 18 months (8%) minus 1% = 7% p.a. on ₹1,00,000 for 18 months.

⚠️ Common exam mistakes

Applying the originally contracted rate (10%) and merely reducing it by 1%, instead of using the rate for the period for which the deposit actually ran and then reducing it by 1%.
Permitting premature repayment within 6 months without invoking the financial hardship exception.
Continuing to pay brokerage for the unrun period of a prematurely repaid deposit.
Confusing 'premature repayment' with 'renewal' — different rules apply.

Bare-Act text Rule 15 · Companies (Acceptance of Deposits) Rules, 2014 · click to expand

Where a company makes a repayment of deposits, on the request of the depositor, after the expiry of a period of six months from the date of such deposit but before the expiry of the period for which such deposit was accepted, the rate of interest payable on such deposit shall be reduced by one per cent. from the rate which the company would have paid had the deposit been accepted for the period for which such deposit had actually run.

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