Govt clears bill to tighten noose around unregulated deposit schemes

The Union Cabinet on Wednesday cleared amendments to the Banning of Unregulated Deposit Scheme Bill, 2018, to check illicit deposit schemes. Deposit takers will now be banned from promoting, operating, or advertising an unregulated scheme, said Law and Information Technology Minister Ravi Shankar Prasad after the Cabinet meeting.

This comes barely a day after the resolution of an imbroglio between the Centre and the West Bengal government over the process followed by the Central Bureau of Investigation (CBI) in its probe into the Saradha ponzi scam. 

“The principle is that the Bill would ban unregulated deposits altogether, by making them an offence ex ante, rather than the existing legislative-cum-regulatory framework, which comes into effect ex post with considerable time lags,” the official statement said.

The Bill provides severe punishment and heavy pecuniary fines. It also has provisions for disgorgement or repayment of deposits in cases where such schemes manage to raise deposits illegally.

Prasad said any entity or company raising these kinds of deposits and hiring celebrities as brand ambassador will be liable for punishment.

To a query on whether the Bill will have retrospective effect, he said that would be examined. 

The Narendra Modi government had introduced the amendment Bill in Parliament. It was referred to the standing committee on finance. The committee suggested strengthening penal provisions in the Bill to protect investors.

The committee had, however, also expressed apprehension that the Bill may end up leaving unfettered discretion upon enforcement authorities at the ground level, where a large number of people depend on small, short-term credit or deposits for their various needs.

“Such ambiguities should be cleared to prevent harassment and misuse,” the committee had said.

To a query on this, Prasad said this would be examined. The Bill, approved by the Cabinet, provides for clear time lines for attachment of property and restitution to depositors. It also enables the creation of an online central database, for collection and sharing of information on deposit-taking activities in the country, Prasad said.

The Bill defines “deposit taker” and “deposit” comprehensively. “Deposit takers” include all possible entities (including individuals) receiving or soliciting deposits, except specific entities such as those incorporated by legislation. “Deposit” is defined in such a manner that deposit-takers are restricted from camouflaging public deposits as receipts, and at the same time, not to curb or hinder acceptance of money by an establishment in the ordinary course of its business.

Prasad said the CBI has lodged 166 cases against these schemes in the four years till November 30, 2018. Most of these schemes were in West Bengal, followed by Odisha, he said. 

He also said the Supreme Court had shifted investigations in the Saradha case in West Bengal to the CBI on May 12, 2014, when the Modi government had not assumed office.