The central government on Wednesday approved to move official amendments to the Banning of Unregulated Deposit Schemes Bill, 2018, pursuant to the recommendations of the Standing Committee on Finance (SCF).
The decision of the cabinet was announced by Union Minister Ravi Shankar Prasad.
The Bill contains a substantive banning clause which bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any unregulated deposit scheme. The principle is that the bill would ban unregulated deposit-taking activities altogether, by making them an offence ex-ante rather than the existing legislative-cum-regulatory framework which only comes into effect ex-post with considerable time lags.
Moreover, it also 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 and has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
Clear-cut timelines have been provided for attachment of property and restitution to depositors. It enables the creation of an online central database, for collection and sharing of information on deposit-taking activities in the country.
The Banning of Unregulated Deposit Schemes Bill, 2018, which was introduced in Parliament on July 18, 2018 provides a comprehensive legislation to deal with the menace of illicit deposit schemes in the country through, complete prohibition of unregulated deposit-taking activity;
deterrent punishment for promoting or operating an unregulated deposit-taking scheme; stringent punishment for fraudulent default in repayment to depositors; designation of a Competent Authority by the State Government to ensure repayment of deposits in the event of default by a deposit-taking establishment;
powers and functions of the competent authority including the power to attach assets of a defaulting establishment; designation of courts to oversee repayment of depositors and to try offences under the act; and listing of Regulated Deposit Schemes in the Bill, with a clause enabling the Central Government to expand the list.
The Finance Minister in the Budget speech 2016-17 had announced that comprehensive central legislation would be brought in to deal with the menace of illicit deposit-taking schemes. The worst victims of these schemes are the poor and financially illiterate.
As per RBI, during July 2014 and May 2018, 978 cases of unauthorised schemes were discussed in state-level coordination committee (SLCC) meetings in various States and were given to the respective regulators/law enforcement agencies in the states.