Govt to reintroduce bill to ban unregulated deposit schemes
11 July 2019
The union cabinet on Wednesday approved the re-introduction of a bill banning all unregulated deposit schemes, including deposit schemes run by jewellers. Deposits taken by small businesses from friends and relatives for purely business purposes will not, however, come under the preview of Banning of Unregulated Deposit Scheme Bill, the government said.
The bill, though passed by the Lok Sabha during first term of the Narendra Modi-led government, could not be taken further and finally lapsed with the end of 16th Lok Sabha. An ordinance was promulgated in February which will cease to operate from first week of August. Now, in order to ensure continuity, the government decided to approve the bill.
The banning of Unregulated Deposit Schemes Bill, 2019 will replace the Ordinance promulgated on 21 February 2019, which will otherwise cease to operate after six weeks after reassembly of Parliament, according to a cabinet release.
The bill will help tackle the menace of illicit deposit taking activities in the country, which at present are exploiting regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard-earned savings.
The new bill will have all the provisions of the ordinance and will bring more clarity on provisions on small businesses taking loan from friends and relatives for genuine business purposes, information and broadcasting minister Prakash Javadekar told reporters after the cabinet meeting.
The bill has provisions to impose an obligation on the deposit taker, under a regulated deposit scheme, not to commit any fraudulent default in the repayment or return of the deposit.
The bill also provides for deterrent punishment for operating unregulated deposit taking scheme and punishment for fraudulent default in repayment to depositors.
Imprisonment could be up to seven years and/or penalty amount could go up to Rs25 crore or three times of illegal profit, which so ever is higher.
It also prescribes designation of a competent authority by the State government to ensure repayment of deposits in the event of default by a deposit taking establishment. The bill, once enacted, empowers the central government to designate an authority which will create, maintain and operate an online database for information on deposit takers operating in India. It also confers powers and functions upon the Competent Authority, including the power to attach assets of a defaulting establishment.