Banning of Unregulated Deposit Scheme Bill, 2018: How will it protect us?

February 20, 2018

Banning of Unregulated Deposit Schemes Bill, 2018:

  1. Context:

    1. It was announced in the Budget 2016-17 due to the menace of illicit deposit taking schemes which defraud gullible people especially financially illiterate and poor.

  2.  

      

    Aim:

    1. Tackling the menace of illicit deposits taking activities in the country.

  3. Details:

    1. Complete prohibition of unregulated deposit taking activity; 

    2. Deterrent punishment for promoting or operating an unregulated deposit taking scheme; 

    3. Stringent punishment for fraudulent default in repayment to depositors; 

    4. Designation of a Competent Authority by the State Government to ensure repayment of deposits in the event of default by a deposit taking establishment; 

    5. Powers and functions of the competent authority including the power to attach assets of a defaulting establishment; 

    6. Designation of Courts to oversee repayment of depositors and to try offences under the Act; and 

    7. Listing of Regulated Deposit Schemes in the Bill, with a clause enabling the Central Government to expand or prune the list.

  4. Explained:

     

      

    1. Currently, the legislative cum regulatory framework comes into effect only after the default has happened on such schemes and that too with considerable time lag. This bill will ban all unregulated deposit taking activities altogether.

    2. These deposits are categorized into three offences:

      • Unregulated Deposit Schemes,

      • Fraudulent default in Regulated Deposit Schemes, and

      • Wrongful inducement in relation to Unregulated Deposit Schemes.

    3. If still these schemes are able to raise deposits, then bill have provisions to return the funds to the depositors.

    4. If money is not being found, then the properties/assets of the accused can be attached for repayment to the depositors by an assigned Competent authority.

    5. Time lines are fixed for attachment of property and restitution to depositors.

    6. Creation of online database for collecting and sharing information on deposit taking initiatives.

    7. Deposit taker and Deposit defined comprehensively.

      1. Deposit takers refer to all possible entities receiving or soliciting deposits(including individuals) except those that are excluded by legislation.

      2. Unregulated Deposit Schemes, fraudulent default in Regulated Deposit Schemes, and wrongful inducement in relation to Unregulated Deposit Schemes.

    8. Implementing authority: State Government

 Benefits:

  1. It will lead to safeguarding of citizen's saving.

  2. It will lead to maintenance of rule of law by penalising fraudsters.

  3. It will create trust for the government among people.

  4. The money collected from these schemes is mostly laundered abroad. This act will thus stop money laundering by cutting off the roots of the process.

  5. This money in savings can be utilised for providing facilities to citizens and helping with nation's growth.

     

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