Amendments to the Banning of Unregulated Deposit Schemes Bill, 2018

The Union Cabinet headed by Prime Minister has approved the amendments to the Banning of Unregulated Deposit Schemes Bill, 2018. The amendments introduced based on the recommendations of the Standing Committee on Finance strengthen its objective to effectively tackle the menace of illicit deposit-taking activities in the country, and prevent such schemes from duping poor and gullible people of their hard earned savings.

Features of the Bill

The salient features of the bill are:

  • The Bill bans Deposit Takers from promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit Scheme. The Bill ban unregulated deposit-taking activities altogether, by making them an offence. The existing legislative-cum-regulatory framework which only comes into effect ex-post with considerable time lags;
  • The Bill creates three different types of offences, namely, running of Unregulated Deposit Schemes, fraudulent default in Regulated Deposit Schemes, and wrongful inducement in relation to Unregulated Deposit Schemes.
  • The Bill provides for severe punishment and heavy pecuniary fines to act as a deterrent.
  • The Bill provides for repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
  • The Bill provides for attachment of properties/assets by the Competent Authority, and subsequent realization of assets for repayment to depositors.
  • Timelines have been provided for attachment of property and restitution to depositors.
  • The Bill enables the creation of an online central database, for collection and sharing of information on deposit-taking activities in the country;
  • The Bill also defines “Deposit Taker” and “Deposit” comprehensively.

Definition of “Deposit Taker” and “Deposit” under the Bill
Deposit Takers include all possible entities (including individuals) receiving or soliciting deposits, except specific entities such as those incorporated by legislation;
Deposit is defined in such a manner that deposit-takers are restricted from camouflaging public deposits as receipts, and at the same time, not to curb or hinder acceptance of money by an establishment in the ordinary course of its business.

The Bill adopts best practices from State laws and entrusts the primary responsibility of implementing the provisions of the legislation to the State Governments.




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