Cabinet approves changes to Banning of Unregulated Deposit Schemes Bill pursuant to the recommendations of the Standing Committee on Finance.

The Union Cabinet on Wednesday approved the official amendments to an Act that classifies any deposit scheme not registered with the government as an offence and bans it, the government announced.

“The Cabinet has given its approval to move official amendments to the Banning of Unregulated Deposit Schemes Bill, 2018, pursuant to the recommendations of the Standing Committee on Finance,” the government said in a release. “The amendments will further strengthen the Bill in its objective to effectively tackle the menace of illicit deposit-taking activities, and prevent such schemes from duping poor and gullible people of their hard-earned savings.”

Among the provisions is one that bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any unregulated 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 that only comes into effect ex-post with considerable time lags,” the government said.

The Bill creates three different types of offences: (i) running of unregulated deposit schemes, (ii) fraudulent default in regulated deposit schemes, and (iii) wrongful inducement in relation to unregulated deposit schemes.

The government said the Bill provides for “severe punishment and heavy pecuniary fines” to act as a deterrent.

Law Minister Ravi Shankar Prasad said penalties could involve jail term as well as the sale of the offenders’ assets to pay back the defrauded party within set timelines.

“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. “The Bill provides for attachment of properties/assets by the competent authority, and subsequent realisation of assets for repayment to depositors.”

“‘Deposit Takers’ include all possible entities (including individuals) receiving or soliciting deposits, except specific entities such as those incorporated by legislation,” the release said.

The Banning of Unregulated Deposit Schemes Bill 2018 was introduced in Parliament on July 18, 2018 and was referred to the standing committee, which submitted its seventieth report on the Bill to Parliament on January 3, 2019.