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Cabinet approves Banning of Unregulated Deposit Schemes Bill, 2018

Date: 08 February 2019 Tags: Bills & Laws

The Union Cabinet approved amendments to Banning of Unregulated Deposit Schemes Bill, 2018. These amendments were recommended by Standing Committee on Finance (SCF). This Bill proposes comprehensive legislation to deal with menace of illicit deposit schemes in the country.

Need for amendments

This Bill was introduced in Parliament in July 2018 to effectively tackle menace of illicit deposit taking activities in the country and prevent Ponzi-schemes such as Saradha Chit Fund Scheme from duping poor people of their hard earned savings. This Bill was later referred to SCF. It had suggested amendments in its Seventieth Report on Bill submitted to Parliament in January 2019.

Key Features of Bill

  • Banning clause:It bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any unregulated deposit scheme. It bans unregulated deposit taking activities altogether, by making them offence.
  • Definition of Deposit Takers: This bill defines it as all possible entities (including individuals) receiving or soliciting deposits, except specific entities such as those incorporated by legislation.
  • Definition of Deposit: it has been defined in such manner that deposit-takers are restricted from concealing public deposits as receipts and not to hinder acceptance of money by an establishment in ordinary course of its business.
  • Defines three different types of offences: Running of Unregulated Deposit Schemes, wrongful inducement in relation to Unregulated Deposit Schemes and fraudulent default in Regulated Deposit Schemes.
  • Competent Authority: It will be designated by State Government to ensure repayment of deposits in event of default by a deposit taking establishment.
  • It defines powers and functions of competent authority including the power to attach assets of a defaulting establishment;
  • Attachment of Properties: It provides for attachment of properties or assets by the Competent Authority and subsequent realisation of assets for repayment to depositors. It provides clear-cut time lines for attachment of property and restitution to depositors.
  • Punishment and Repayments: It prescribes severe punishment and heavy fines for offenders. It also provides adequate provisions for repayment of deposits in cases where such schemes manage to raise deposits illegally.It designates Courts to oversee repayment of depositors and to try offences mention under its ambit.
  • Best Practices: This central law adopts best practices from State laws and entrusts primary responsibility of implementing provisions of legislation to State Governments.Chit funds are regulated by State Laws.
  • Online Database: It calls for creation of online database for collection and sharing of information on deposit-taking activities in the country.


In Budget 2016-17, Union Government had announced enacting comprehensive Central legislation to deal with menace of illicit deposit taking schemes. This was tackle rising instances of fraudulent unregulated deposit schemein various parts of the country which defrauded many people. The worst victims of these schemes were poor and financially illiterate and operations of such schemes had spread over many States.

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