To protect interests of depositors of non-banking financial institutions, Rajasthan Cabinet on Thursday gave in-principle approval to the Rajasthan Protection of Interests of Depositors (in Financial Establishments) Ordinance, 2016.
“The provisions in the ordinance will protect the interest of depositors in case of fraudulent default by any financial establishment,” said state Parliamentary Affairs Minister Rajendra Rathore after the Cabinet meeting.
The Ordinance will be sent to the President, through Governor, for his assent.
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Rathore said that a provision has been made in the ordinance that if a financial establishment defaults any repayment of deposit on maturity, along with any benefit as promised, or fails to render service as assured against the deposit, then penalty will range from three to seven years of imprisonment and a fine of anywhere between Rs 2 lakh to Rs 5 lakh.
There is also a provision to attach the properties of the firm on payment default.
Rathore said that the ordinance is aimed at non-banking institutions and chit fund companies, which mislead people through their “tempting” advertisements and lure them to invest their hard earned money.
The ordinance states that if the District Magistrate is satisfied that the financial establishment is not likely to return the money and other benefits to the depositor, then the DM can attach the assets of such establishment.
Further, the DM can appoint a competent authority — not below the rank of assistant collector — to exercise control over the money, properties and assets attached by the DM. The authority shall make payment to the depositors as per the orders passed by the designated court.
The designated court, on the other hand, should complete the hearing and take decision within a year, according to the ordinance.