To deal with illegal deposit taking activities and to make such actions an offence ex-ante, the Union Cabinet on Wednesday approved amendments to the Banning of Unregulated Deposit Schemes Bill, 2018. These changes are based on the recommendations of the Standing Committee on Finance (SCF), which submitted its report on the bill on January 3. The bill was introduced in Parliament last July.
The Bill provides for severe punishment and pecuniary fines to act as deterrent for such illicit activities. It also has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally, the government said. “As per information provided by RBI, during the period between July 2014 and May 2018, 978 cases of unauthorised schemes were discussed in State Level Coordination Committee (SLCC) meetings in various States/UTs and were given to the respective regulators/law enforcement agencies in the states. A large number of such instances have been reported from the eastern part of the country,” the government said. The idea of a legislation to ban such deposit taking activities was announced in the Budget 2016-17.
The Bill completely bans deposit takers from promoting, advertising or accepting deposits in any unregulated scheme. “The principle is that the Bill would ban unregulated deposit taking activities altogether, by making them an offence ex-ante rather than the existing legislative-cum-regulatory framework which only comes into effect ex-post with considerable time lags,” it said.
Three types of offences have been captured in the proposed law — running of Unregulated Deposit Schemes, fraudulent default in Regulated Deposit Schemes, and wrongful inducement in relation to Unregulated Deposit Schemes. The Bill also provides for attachment of properties and assets of the deposit taker and subsequent realisation of assets for repayment to depositors. It will enable creation of an online central database, for collection and sharing of information on deposit-taking activities in India.
“The official amendments will further strengthen the Bill in its objective to effectively tackle the menace of illicit deposit taking activities in the country, and prevent such schemes from duping poor and gullible people of their hard earned savings,” the Centre said.
Union Minister for Law and Justice Ravi Shankar Prasad, in an official briefing, said that the “essence of the bill” was that every “deposit scheme has to properly registered” and if it is not, “then it is an offence”, including “any promotion” of such a scheme and involving brand ambassadors, which he said will also be a “serious offence”.
Prasad said that in the four years between 2015 and as of November 30, 2018, The CBI has registered 166 cases in chit funds and multi growth scams, most of which have been in West Bengal and Odisha. In the Saradha scam case, which led to friction between CBI and the West Bengal police earlier this week, Prasad said that the SIT had been set up in 2013 and the Supreme Court had ordered that CBI investigate the matter on May 9, 2014, before the Narendra Modi-led government took oath.