Govt mulls stringent law to check ponzi operators

The Union Cabinet chaired by Prime Minister Narendra Modi on Tuesday gave its approval to introduce Banning of Unregulated Deposit Schemes Bill, 2018, in Parliament.

"The bill is aimed at tackling the menace of illicit deposit taking activities in the country.

"Companies/ institutions running such schemes exploit existing regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard-earned savings," an official statement said.

The worst victims of such schemes are the poor and the financially illiterate, and the operations of such schemes

are often spread over many states.

The comprehensive bill, it said provides for complete prohibition of unregulated deposit taking activity and prescribes deterrent punishment.

As per the bill, competent authorities would be set up by state governments to "ensure repayment of deposits in the event of default by a deposit taking establishment".

As per the release, 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.

The bill proposes to create 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.

It provides for severe punishment and heavy pecuniary fines to act as deterrent.

"The Bill has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally," the release said.

Clear-cut timelines have been provided for attachment of property and restitution to depositors.

There would also of an online central database, for collection and sharing of information on deposit taking activities in the country.

"Being a comprehensive Union law, the Bill adopts best practices from State laws, while entrusting the primary responsibility of implementing the provisions of the legislation to the state governments," it said.

Finance Minister Arun Jaitley in the Budget Speech 2016-17 had announced that a comprehensive central legislation would be brought in to deal with the menace of illicit deposit taking schemes, as in the recent past, there have been rising instances of people in various parts of the country being defrauded by illicit deposit taking schemes.

Subsequently, the finance minister in the Budget Speech 2017-18 had announced that the draft bill to curtail the menace of illicit deposit schemes had been placed in the public domain and would be introduced shortly after its finalisation.