- The Union Cabinet has approved Banning of Unregulated Deposit Schemes Bill to put curbs on raising money illegally.
- Unregulated deposit scheme: A deposit-taking scheme is defined as unregulated if it is not registered with regulators such as Ministry of Corporate Affairs (MCA), RBI, SEBI etc.
- Deposit takers: Deposit taker is an individual, a group of individuals, or a company who asks for (solicits), or receives deposits. Banks and entities incorporated under any law are not included as deposit takers.
- There have been rising instances of people in various parts of the country beingdefrauded by illicit deposit taking schemes.
- The worst victims of these schemes are the poor and the financially illiterate, and the operations of such schemes are oftenspread over many States.
- In order to provide for a mechanism to ban unregulated deposit schemes and protect the interests of depositors, Banning of Unregulated Deposit Schemes Bill, 2019 was passed in Lok Sabha in February, 2019. However, the Bill could not be taken up for consideration and passing in the Rajya Sabha.
- To give effect to provisions of the Bill, the Banning of Unregulated Deposit Schemes Ordinance, 2019 was promulgated.
- With the February Bill lapsing after the dissolution of 16th Lok Sabha, and the Ordinance set to lapse, a new Bill will now be introduced again in the Parliament.
Banning of Unregulated Deposit Schemes Bill, 2019The Bill will provide a comprehensive legislation to deal with the menace of illicit deposit schemes in the country.Provisions:
- Banning all unregulated deposit schemes: The Bill contains a substantive banning clause, which bans Deposit Takers from promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit Scheme.
- Different kind of offences: The Bill creates three different types of offences namely:
- running Unregulated Deposit Schemes
- fraudulent default on Regulated Deposit Schemes
- wrongful inducement in relation to Unregulated Deposit Schemes
- Competent authority: The bill provides for the designation of a Competent Authority by the State Government to ensure repayment of deposits in the event of default by a deposit taking establishment.
- Designated Courts: The Ordinance provides for the constitution of one or more Designated Courts in specified areas.
- Punishment: The Bill provides for severe punishment and heavy pecuniary fines to act as deterrent.
- Repayment of deposits: The Bill has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
- Attachment of property: The Bill provides for attachment of properties/ assets by the Competent Authority and subsequent realization of assets for repayment to depositors.
- Time limit: Clear-cut timelines have been provided for attachment of property and restitution to depositors.
- Online central database: The Bill enables creation of an online central database for collection and sharing of information on deposit taking activities in the country.