Govt introduces Bill to check ponzi schemes in LS
New Delhi: A Bill seeking to tackle the menace of illicit fund collection from members of the public in the country was introduced in Lok Sabha on Friday by Finance Minister Nirmala Sitharaman empowering local police officers to raid the premises of Ponzi scheme office without a search warrant. The Banning of Unregulated Deposit Schemes Bill, 2019 will replace the Banning of Unregulated Deposit Schemes Ordinance, 2019.
The bill seeks to help tackle the menace of illicit deposit-taking activities in the country, which at present are exploiting regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard-earned money, according to the government.
The bill was introduced Sitharaman amidst noisy protests from Congress members over the ongoing political crisis in Karnataka.
The proposed legislation will have adequate provisions for punishment and disgorgement (repayment) of deposits in cases where such schemes somehow manage to raise illegal deposits. The Ordinance defines three types of offences, and penalties related to them. These offences include running advertising, promoting, operating schemes or accepting money for unregulated deposit schemes, fraudulently defaulting on regulated deposit schemes, and wrongfully inducing depositors to invest in unregulated deposit schemes by willingly falsifying facts.
For example, accepting unregulated deposits will be punishable with imprisonment between two and seven years, along with a fine ranging from Rs 3-10 lakh. Defaulting on repayment of unregulated deposits will be punishable with imprisonment between three and 10 years, and a fine ranging from Rs 5 lakh to twice the amount collected from depositors. Repeat offenders under the Ordinance will be punishable with imprisonment between five to 10 years, along with a fine ranging from Rs 10 lakh to Rs 5 crore.
The Banning of Unregulated Deposit Schemes Ordinance, 2019 was promulgated on February 21, 2019. Earlier, a similar Bill was passed by Lok Sabha on February 13, 2019. However, it had lapsed with the dissolution of the 16th Lok
Sabha. The Ordinance provides for a mechanism to ban unregulated deposit schemes and protect the interests of depositors. It also seeks to amend three laws, i.e., the Reserve Bank of India Act, 1934, the Securities and Exchange Board of India Act, 1992 and the Multi-State Co-operative Societies Act, 2002.
The bill defines a deposit as an amount of money received through an advance, a loan, or in any other form, with a promise to be returned with or without interest. Such deposits may be returned either in cash or as a service, and the time of return may or may not be specified. Further, the Ordinance defines certain amounts which shall not be included in the definition of deposits such as amounts received in the form of loans from relatives and contributions towards capital by partners in any partnership firm.
Currently, nine regulators oversee various deposit-taking schemes. These include the RBI, SEBI, the Ministry of Corporate Affairs, and state and union territory governments. For example, RBI regulates
deposits accepted by non-banking financial companies, SEBI regulates mutual funds, state and union territory governments regulate chit funds, among others. All deposit-taking schemes are required to be registered with the relevant regulator.
