The Banning of Unregulated Deposit Schemes Bill, 2019, aims to replace an ordinance promulgated in February this year
A similar bill was passed in the Lok Sabha earlier this year but did not make it through the Rajya Sabha
The Union cabinet on Wednesday cleared a new bill to prohibit all unregulated deposit schemes such as the infamous ponzi scheme run by the Saradha Group companies.
The Banning of Unregulated Deposit Schemes Bill, 2019, aims to replace an ordinance promulgated in February this year. A similar bill was passed in the Lok Sabha earlier this year but did not make it through the Rajya Sabha.
Ponzi schemes induce unsuspecting depositors with promises of huge returns, invest heavily in marketing operations to build an ever expanding chain of investors and pay off some investors from the deposits of new participants than from any return on genuine investments. Such schemes lead to a large number of people losing money.
The bill will help tackle this menace of illicit deposit-taking activities, which exploit regulatory gaps and lack of strict administrative measures, the government said in a statement after the cabinet meeting. It aims to protect people from being robbed of their hard-earned savings by operators of such schemes.
“Hopefully this bill will be passed in this session," information and broadcasting minister Prakash Javadekar said after the cabinet meeting. This statement assumes significance as Parliament has five more working days before the session ends on 7 August.
The bill proposes compulsory registration of deposit-taking schemes with a list of specified financial sector regulators or with the Central or state government. It also allows police officers of a certain rank to search the premises of deposit takers and seize property linked to an offence under this statute. The bill also proposes setting up a competent authority empowered to provisionally attach the property of any deposit taker or all the deposits received. This authority will have powers similar to those of a civil court.
The bill also provides for penalties for running unregulated deposits, fraudulently defaulting on regulated deposit schemes, and wrongfully inducing depositors to invest in such schemes by falsifying facts.
Once the new bill is signed into law, designated courts will be set up to hear cases under it. The bill also envisages the creation of a central online database of all deposit takers.