Banning of Unregulated Deposits Scheme 2019

Banning of Unregulated Deposits Scheme Bill 2019

The Bill provides for a mechanism to ban unregulated deposit schemes and protect the interests of depositors.

Banning of Unregulated Deposits Scheme Bill 2019

Banning of Unregulated Deposits Scheme 2019

KEY HIGHLIGHTS OF THE BILL

The Banning of Unregulated Deposits Scheme Bill 2019 provides for a mechanism to ban unregulated deposit schemes and protect the interests of depositors.  It seeks to amend three laws :

  • The Reserve Bank of India Act, 1934
  • The Securities and Exchange Board of India Act, 1992  
  • The Multi-State Co-operative Societies Act, 2002


Definition of Deposit

  • The Bill defines a deposit as any amount of money which is received through an advance, a loan, or in any other form, with a an assurance to be returned with or without interest.  Such deposits may be returned either in cash or as a service, and the time of return may or may not be specified.  
  • Amounts received in the form of loans from relatives and contributions towards capital by partners in any partnership firm will not be covered under deposit.

Ban on Unregulated Deposit Schemes 

  • The Bill bans unregulated deposit schemes.  
    • A deposit-taking scheme is defined as unregulated if it is taken for a business purpose and is not registered with the regulators listed in the Bill. 
  • Definition of Deposit Taker : The Bill defines deposit takers as an individual, a group of individuals, or a company who asks for (solicits), or receives deposits. 
    • Banks and entities incorporated under any other law are not included as deposit takers.

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Provisions for Competent Authority

  • One or more government officers, not below the rank of Secretary to the state or central government, shall be appointed as the Competent Authority who will be reported about the offences committed under the Bill.
  • Police officers (not below the rank of an officer-in-charge of a police station) may enter, search and seize any property believed to be connected with an offence under the Bill, with or without a warrant.
  • Competent Authority shall have the powers similar to those vested in the civil courts. He can:
    • Provisionally attach the property of the deposit taker, as well as all deposits received, 
    • Summon and examine any person it considers necessary for the purpose of obtaining evidence, and 
    • Order the production of records and evidence.


Provisions for Designated Courts 

  • The Bill provides for the constitution of one or more Designated Courts in specified areas.  
  • This Court will be headed by a judge not below the rank of a district and sessions judge, or additional district and sessions judge. 

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Provision for a Central Database 

  • The Bill provides for the central government to designate an authority to create an online central database for information on deposit takers.

Provision for the Punishments 

  • 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 2-7 years, along with a fine ranging from 3 to 10 lakh rupees.  Defaulting in repayment of unregulated deposits will be punishable with imprisonment between 3 and 10 years, and a fine ranging from 5 lakh rupees to twice the amount collected from depositors.  
    • Further, repeated offenders under the Bill will be punishable with imprisonment between 5 to 10 years, along with a fine ranging from Rs 10 lakh to 5 crore rupees.


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