Not just that, no individual or group of individuals can take any deposit or loan from any person other than relatives; partnership firms, in turn, can take deposits or loans from relatives or partners only
New Delhi: The government has issued an Ordinance banning unregulated deposit schemes: the avowed idea is to prevent chit fund scams and protect small investors. Under the Ordinance, no individual or group of individuals can take any deposit or loan from any person other than relatives; whereas partnership firms can take deposits or loans from relatives or partners only.
The Ordinance also provides for severe punishment ranging from 1 year to 10 years and pecuniary fines ranging from Rs 2 lakh to Rs 50 crore, which is expected to serve as a deterrent. It also has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
The Ordinance will immediately tackle deposit taking activities launched by rapacious operators, which at present are exploiting regulatory gaps and lack of strict administrative measures. At the receiving end are poor and gullible people, who are being duped of their hard-earned savings.
The Ordinance will altogether ban unregulated deposit taking schemes, also called Ponzi schemes. Any person running such deposit schemes without registration would attract penal provisions of the law. Advertisements of such unregistered schemes and brand ambassadors of such schemes would also be covered under the law.
The decision to amend the law came amid a storm over investigations into the Saradha and Rose Valley chit fund schemes that rocked West Bengal and other states and triggered a political war between the Trinamool Congress government in the state and the Narendra Modi government at the Centre.
The Ordinance makes it absolutely necessary for everyone to register before taking a deposit; this will lead to creation of a central repository of all the registered entities which can take deposits.
So, whosoever are not registered are not regulated entities. The Lok Sabha passed the Bill to this effect on the last day of the budget session by a voice-vote, but the legislation could not get the approval of the Rajya Sabha. That is why, the Ordinance.
