Recently, the Union cabinet has
given its nod to table The Banning of Unregulated Deposit Schemes and Chit
Funds (Amendment) Bill, 2018 in the Parliament, in order to curb, fraudulent deposit/
Ponzi schemes which had collected and laundered huge amounts of money from
large section of people, exploiting their finances and greed for quick and high
return.
In a major policy initiative to
protect the savings of the investors, the Union Cabinet has given its approval
to introduce the following bills in the Parliament to facilitate orderly growth
of the sector and provide more financial products to investors:-
(a) Banning of Unregulated
Deposit Schemes Bill, 2018 in parliament &
(b) Chit Funds (Amendment)
Bill, 2018
The bill is aimed at tackling the
menace of illicit deposit-taking activities in the country.
Companies/institutions running such schemes exploit existing regulatory gaps
and lack of strict administrative measures to dupe poor and gullible people of
their hard-earned savings.
A new comprehensive law would
completely prohibit unregulated deposit-taking and provide for deterrent
punishment for promoting or operating such schemes, besides introducing other
changes.
On the proposal to make changes
in the Chit Funds Act, the statement said the government aims to facilitate
orderly growth of the sector and remove bottlenecks being faced by the
industry.
The Banning of Unregulated
Deposit Schemes Bill, 2018
The Union Cabinet has given
approval to introduce the banning of Unregulated Deposit Schemes Bill,
2018 in Parliament. The bill is aimed at tackling the menace of illicit deposit
taking activities in the country.
Details:
The Banning of Unregulated
Deposit Schemes Bill, 2018 will provide 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 or prune the
list.
Banning of Unregulated
Deposit Schemes Bill, 2018
The salient features of the Bill
are as follows:
•
The Bill is aimed at banning deposit takers from
operating, promoting, issuing ads or accepting deposits in any deposit scheme
which is unregulated.
•
The Bill provides for heavy pecuniary fines
& severe punishment, which will act as deterrent.
•
The Bill provides for severe punishment and
heavy pecuniary fines to act as deterrent.
•
The Bill has adequate provisions for
disgorgement or repayment of deposits in cases where such schemes nonetheless
manage to raise deposits illegally.
•
The Bill provides for attachment of property and
assets by a competent authority, and subsequent realization of assets for
repayment to depositors.
•
Clear-cut timelines have been provided for
attachment of property and restitution to depositors.
•
The Bill enables creation of an online central
database for collection and sharing of information on deposit taking activities
in the country.
•
The Bill defines "Deposit Taker" and
"Deposit" comprehensively.
•
"Deposit Takers" include all possible
entities (including individuals) receiving or
soliciting deposits, except specific entities
such as those incorporated by legislation.
•
"Deposit" is defined in such a manner
that deposit takers are restricted from camouflaging public deposits as
receipts, and at the same time not to curb or hinder acceptance of money by an
establishment in the ordinary course of its business.
•
Being a comprehensive Union law, the Bill adopts
best practices from State laws, while entrusting the primary responsibility of
implementing the provisions of the legislation to the State Governments.
Background:
The Finance Minister in the
Budget Speech 2016-17 had announced that a comprehensive central legislation
would be brought in to deal with the menace of illicit deposit taking schemes,
as in the recent past, there have been rising instances of people in various
parts of the country being defrauded by illicit deposit taking schemes. The
worst victims of these schemes are the poor and the financially illiterate, and
the operations of such schemes are often spread over many States. Subsequently,
Finance Minister in the Budget Speech 2017-18 had announced that the draft bill
to curtail the menace of illicit deposit schemes had been placed in the public
domain and would be introduced shortly after its finalization.
The Chit Funds (Amendment)
Bill, 2018
The Bill is aimed at facilitating
orderly growth of the chit funds sector and remove bottlenecks being faced by
it. For this, amendments to the Chit Funds Act, 1982 have been proposed, which
include:
For more detail:
Download
Acquisory News Chronicle February 2018
