Parliament passes bill to ban unregulated deposits scheme

A bill to protect the interests of depositors subscribing to various unregulated deposit schemes. A lot of poor people have lost their hard-earned money due to the illicit deposit-taking activities in the country.

The Parliament has passed the Banning of Unregulated Deposit Schemes Bill, 2019 on 29 July 2019 to put in place a mechanism to ban unregulated deposit schemes and safeguard the interests of the depositors. 

While the Lok Sabha passed the bill on 24 July 2019, the Rajya Sabha passed the bill on 29 July 2019. In the discussions in the Parliament, the Minister of State (MOS) for Finance, Anurag Singh Thakur said that an inter-ministerial group was constituted to address gaps in existing legislation.

A new central law had been recommended to tackle the menace of unregulated deposit schemes. The bill had been introduced by the government to bring back monies lost by various depositors in ponzi schemes.

The bill prioritises the claims of depositors on the monies recovered from a deposit taker, in preference to all other debts, rates, and taxes payable to the government. The bill excludes deposits taken from buyers by real estate firms, and deposits taken by an individual by way of loan from relatives, among others.

The bill states, in the statement of objects and reasons, seeks to put in place a mechanism by which the depositors can be repaid without delay by attaching the assets of the defaulting establishments.

The bill also seeks to exempt from its purview deposits taken in the ordinary course of business to enable various entities to take deposits for their ordinary course of business.

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The bill also gives power to both the central and state government to make rules for various matters envisaged under the bill. The MOS Finance also mentioned that 978 cases have been identified so far and of this 326 are from West Bengal.

Various deposit takers in the country have been exploiting loopholes and regulatory gaps and have duped poor and gullible people under the various unregulated deposit schemes.

The bill bans a deposit taker from promoting, operating, issuing any advertisement soliciting participation or enrolment in an unregulated deposit scheme, or accept deposits under an unregulated deposit scheme.

The bill puts in place a comprehensive mechanism to curtail unregulated deposits. Amongst others, the bill seeks to create, maintain and operate an online database for information on deposit takers operating in India. 

The bill categorises offences into three different types: offences of running unregulated deposit schemes, the offence of fraudulent default in repayments, and wrongful inducement in relation to unregulated deposit schemes.

The bill also provides for punishment for deposit takers as well as repayment of monies raised in contravention of the provisions of the bill. The bill also provides for punishment for deposit takers ranging from 1 year up to 10 years and fines ranging from Rs 2 lakh to Rs 50 crore. 

The bill also provides for attachment of properties or assets of deposit takers and subsequent realisation of assets for repayment to depositors. The bill provides for timelines for attachment of property and restoring the monies to the depositors.