Cabinet approves Banning of Unregulated Deposit Schemes Bill
New Delhi: The Union Cabinet chaired by the Prime Minister Narendra Modi on Wednesday approved the Banning of Unregulated Deposit Schemes Bill, 2019. It will replace the Banning of Unregulated Deposit Schemes Ordinance, 2019 promulgated on February 21, 2019, which will otherwise cease to operate after six weeks after reassembly of Parliament.
As per the government statement, 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.
It may be noted that the banning of Unregulated Deposit Scheme Bill, 2018 was considered by the Lok Sabha in its sitting held on February 13, 2019, and after discussion, the same was passed, as amended through the proposed official amendments, as the banning of Unregulated Deposit Scheme Bill, 2019. However, before the same could be considered and passed in the Rajya Sabha, the Rajya Sabha was adjourned sine die on the same day.
In the last four years, the CBI has lodged over 166 cases related to chit funds and multi-crore scams. Among the provisions of this Bill is a ban on unregulated deposit-taking schemes, punishment and repayment of deposits in cases where such schemes manage to raise deposits illegally.
The government said on Wednesday that small businesses taking deposits from friends and relatives for purely business purposes will not come under the preview of Banning of Unregulated Deposit Scheme Bill. However, the deposit scheme operated by jewellers will be considered illegal.
Worth mentioning here is that the Bill defines a deposit as an amount of money received through an advance, a loan, or in any other form, with a promise to be returned with or without interest. Such deposit may be returned either in cash or as a service, and the time of return may or may not be specified.
Currently, nine regulators oversee and regulate various deposit-taking schemes. These include the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Ministry of Corporate Affairs, and state and union territory governments. For example, RBI regulates deposits accepted by non-banking financial companies, SEBI regulates mutual funds, state and union territory governments regulate chit funds, among others.
All deposit-taking schemes are required to be registered with the relevant regulator. An Unregulated deposit scheme is one which is not registered with the regulators listed in the Bill.
The Bill defines three types of offences, and penalties related to them. These offences are running (advertising, promoting, operating or accepting money for) unregulated deposit schemes, fraudulently defaulting on regulated deposit schemes, and wrongfully inducing depositors to invest in unregulated deposit schemes by willingly falsifying facts.
Accepting unregulated deposits will be punishable with imprisonment between two and seven years, along with a fine ranging from Rs 3 to 10 lakh. Defaulting in repayment of unregulated deposits will be punishable with imprisonment between three and 10 years, and a fine ranging from Rs five lakh rupees to twice the amount collected from depositors. Repeated offenders under the Bill will be punishable with imprisonment between five to 10 years, along with a fine ranging from Rs 10 lakh to five crore.