Depositors with money in organised and government owned banks may be a worried lot now, but the government cannot be faulted for not being concerned about protecting savings of investors.
The Union cabinet on Tuesday decided to completely ban “unregulated deposit taking”, and decided to introduce the “Unregulated Deposit Schemes Bill 2018” in Parliament. This is in continuation of Finance Minister Arun Jaitley's announcement in his budget speech 2016-17, 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 in various parts of the country where people being defrauded by illicit deposit taking schemes.”
The proposed Unregulated Deposit Schemes Bill bans deposit takers from promoting, operating, issuing advertisements or accepting deposits, and makes them an offence ex-ante. At present, the legislative cum regulatory framework comes into effect ex-post with considerable time lags.
The Bill provides for severe punishment and heavy fines, disgorgement or repayment of deposits in schemes, attachment of properties and assets to realise repayment for depositors, among other things.
Technology will be used, for the Bill provides for an online central database for collecting and sharing information on deposit taking activities across the country.
According to the Cabinet Committee on Economic Affairs, government will also introduce the Chit Funds (Amendment) Bill, 2018, in order to “facilitate orderly growth of the chit funds sector and removing bottlenecks being faced by the chit funds industry.” This, the government says, is in order to enable “greater financial access of people to other financial products.”
Chit funds will become “Fraternity Funds”, in order to distinguish them from the “prize chits” which are banned under a separte law.