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Amendments to Unregulated Deposit Bill: A frontal Attack on Chit Fund Scams

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Aahana Ashi
Amendments to Unregulated Deposit Bill: A frontal Attack on Chit Fund Scams

The Cabinet approval for bringing amendments to the Banning of Unregulated Deposit Schemes Bill, 2018 has once again highlighted Modi government’s sincere attempts at curbing the menace of rampant spread of unregulated deposit schemes which have for years impacted small savers particularly.

The Bill contains a substantive banning clause which bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any unregulated deposit scheme.

In principle, the Bill would ban unregulated deposit taking activities altogether, by making them an offence ex-ante instead of awaiting the existing legislative-cum-regulatory framework to work out the modalities over time.

Being comprehensive in scope, it covers three different types of offences, running of Unregulated Deposit Schemes, fraudulent default in Regulated Deposit Schemes, and wrongful inducement in relation to Unregulated Deposit Schemes.

Clear-cut time lines have been provided for attachment of property and restitution to depositors.

As per the RBI, during the period between July, 2014 and May, 2018, 978 cases of unauthorized schemes were discussed in State Level Coordination Committee (SLCC) meetings in various States/UTs and were given to the respective regulators/law enforcement agencies in the states.

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Aahana Ashi
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