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Ordinance To Ban Unregulated Deposit Schemes

The President Has Promulgated The Banning Of Unregulated Deposit Schemes Ordinance Which Provides For A Mechanism To Ban Unregulated Deposit Schemes And Protect The Interests Of Depositors.

Background Recently, The Country Has Seen Rising Instances Of People Being Defrauded By Illicit Deposit-Taking Schemes; For Example Rose, Valley Scam And Sraddha Chit Fund Scam In West Bengal.

The Worst Victims Of These Schemes Are The Poor And Financially Illiterate ;And The Operations Of Such Schemes Are Often Spread Over Many States.

The Lok Sabha Had Passed A Bill Similar To The Ordinance On The Last Day Of The Recently -Concluded Budget Session ,But The Legislation Could Not Get The Approval Of The Rajya Sabha .In Order To Bring It Into Force ,The Government Decided To Enforce It Via An Ordinance.

Key Points

Definitions: Deposit Takers Are Defined As Entities (Including Individuals) Receiving Or Soliciting Deposits. Deposit Is Defined 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.

Regulated: Regulated Deposits Are Defined As All Deposit -Taking Schemes Which Are Overseen And Regulated By Specified Regulators Like, The Reserve Bank Of India (SEBI),The Ministry Of Corporate Affairs And State And Union Terrorist Governments. A Scheme Is Unregulated ‘If It Is Not Registered With Any Of The Regulators.

Unregulated: It Bars All Deposit Schemes In The Country That Are Not Officially Registered With The Government (I.E The Unregulated Ones) From Either Seeking Or Accepting Deposits From Customers.

Penalties: The Ordinance Has Separate Penalties For Those Who Solicit Deposits For An Unregulated For Those Who Solicit Deposits For An Deposits, And Those Who Then Fraudulently Default On Repaying The Depositors.

Database: The Ordinance Provides For The Creation Of A Body That Maintains An Online Data Base Of Deposit Takers And Schemes Operating In India, Thus Making It Easier To Regulate Their Activities And Prevent Fraud From Being Committed Against Ordinary People.

Advertisements: The Law Also Makes It Incumbent Upon Newspaper To Verify The Advertisements Placed In Them To Ensure That None Of Them Is For Unregulated Deposit Schemes.

Issues Involved

The Intent Of The Ordinance ,To Protect Small Depositors ,Is Indeed Commendable But He Benefits That Depositors Will Eventually Derive Will Depend Largely On Its Proper Implementation.

In The Past, There Have Been Several Cases Of Politicians Acting In Cahoots With The Operators Of Fraudulent Deposit Schemes To Fleece Depositors Of Their Hard-Earned Money.

The Government Taking Upon Itself To Guarantee The Legitimacy Of Deposit Schemes Has The Potential Risk Of Dissuading Depositors From Conducting The Necessary Due To Diligence Before Choosing To Deposit Their Money.

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