President Ram Nath Kovind on Thursday approved the Banning of Unregulated Deposit Scheme Ordinance which seeks to curb the menace of Ponzi schemes and make such unregulated deposit scheme punishable. The Ordinance promulgated by the President will help put a check on illicit deposit-taking activities like Saradha scam and Rose Valley chit fund scam in the country that dupe poor and the financially illiterate of their hard earned savings.
The Lok Sabha passed the Bill to this effect on the last day of the budget session by a voice vote, but the legislation could not get the nod from the Upper House, the Rajya Sabha.
Earlier this week, the United Cabinet has requested the President of India for promulgation of the Unregulated Deposit Schemes Ordinance, 2019.
Earlier after Union Cabinet clears that ‘Bill’, Union Law Minister Ravi Shankar Prasad in a tweet that this will help Lakhs of poor people and save their hard earned money from chit funds etc.
#Cabinet today approved amendments in Banning of Unregulated Deposit Schemes Bill to penalize those who run unregistered deposit schemes. This will help Lakhs of poor people and save their hard earned money from chit funds etc. #ModiStopsChitFundScams pic.twitter.com/t1dBU6vJQz
— RSPrasad Office (@OfficeOfRSP) February 6, 2019
The Ordinance contains a substantive banning clause which bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit 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,” a government release said.
It also has a provision of several punishments and heavy fines for Deposit takers violating the rules. As per the Ordinance, there will be three different types of offences -running of unregulated deposit schemes, fraudulent default in regulated deposit schemes, and wrongful inducement in relation to unregulated deposit schemes.
The banning of Unregulated Deposit Schemes Bill, 2018 was introduced in Parliament on 18th July 2018 and was referred to the Standing Committee of Finance, which submitted its report to the Parliament on January 3 this year.
As per RBI data, from July 2014 to May 2018, 978 cases of unauthorized schemes were discussed in the State Level Coordination Committee (SLCC) meetings in various states and were given to the respective law enforcement.
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