Law coming soon to ban unregulated deposit schemes

NEW DELHI, FEBRUARY 20

The Union Cabinet on Tuesday gave its nod for the introduction in Parliament of a comprehensive Bill to deal with illicit deposit schemes.

The new Bill — The Banning of Unregulated Deposit Schemes Bill 2018 — provides for complete prohibition of unregulated deposit taking activity. It also provides for deterrent punishment for promoting or operating an unregulated deposit-taking scheme.

Stringent punishment

There will also be stringent punishment for fraudulent default in repayment to depositors.

The Bill will provide for designation of a competent authority by the State government to ensure repayment of deposits in the event of default by a deposit-taking establishment.

Finance Minister Arun Jaitley had in his Budget 2016-17 speech announced that a comprehensive Central legislation would be brought in to deal with illicit deposit-taking schemes. This was necessary as 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, Jaitley had then said..

Subsequently, Finance Minister had in his Budget 2017-18 speech 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 finalisation.

Chit funds

The Cabinet also gave its nod for the introduction of the Chit Funds (Amendment) Bill, 2018.

The amendments proposed include increasing the ceiling of the foreman’s commission from a maximum of 5 per cent to 7 per cent, as the rate has remained static since the commencement of the Act while overheads and other costs have increased manifold.