Bill to check ponzi schemes passed in LS

Bill to check ponzi schemes passed in LS

Agency News

New Delhi, Jul 24: A Bill, to help tackle the menace of illicit deposit-taking activities in the country, which at present are exploiting regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard-earned savings, was passed in the Lok Sabha on Wednesday.

Piloting his maiden bill, Minister of State for Finance Anurag Thakur thanked members across the party lines for their unanimous consent. The Bill replaces the Ordinance, promulgated on February 21, 2019. The 'Banning of Unregulated Deposit Schemes Bill 2019' was passed by voice vote. Replying to the debate, Thakur said the Bill, which was passed in the 16th Lok Sabha, could not be cleared in the House of the Elders. Since it would have lapsed, so the ordinance route was taken.

Union Finance Minister Nirmala Sitharaman sat through the reply, supporting her junior Minister and was seen thumping desks, along with the members. With the passage of the Bill, the states, as well as the Centre, will be strengthened to deal with the culprits, who have cheated the poor and gullible, he said, adding that states were equally responsible to see that a poor man's money is protected.

Congress leader in the House Adhir Ranjan Chowdhury stressed on financial literacy of the poor people. Trinamool Congress member Kalyan Banerjee also appreciated Thakur for piloting his maiden Bill. He also said depositors will be given priority and their money will be returned in a time-bound manner.

Stressing that the state governments and officials should not stand with the fraudsters, Mr Thakur maintained that a comprehensive bill has been brought, which plugs loopholes and the states will be formulating the rules. He also clarified that according to the provision made by the government, the central database is for the 'deposit-taker'.

Mr Thakur said the Bill has gone through scrutiny at different level and also Standing Committees. Ms Sitharaman, while appreciating the 'fighting spirit' of Mr Chowdhury, said in a clarification that money was given to the banks for balancing of books and it will be recovered by them.

The Bill proposes jail term of up to 10 years and a fine up to Rs 10 lakh, for default in repayment. Fraudulent default in regulated deposit schemes can result in jail term up to 7 years and/or fine up to Rs 25 crore. The Bill makes it clear that no deposit taker 'shall, directly or indirectly, promote, operate, issue any advertisement soliciting participation or enrolment in or accept deposits in pursuance of an unregulated deposit scheme'.

The proposed law also says that no deposit taker, while accepting deposits pursuant to a regulated deposit scheme, will commit any fraudulent default in the repayment or return of deposit on maturity or in rendering any specified service promised against such deposit.

No person by whatever name called will knowingly make any statement, promise or forecast which is false, deceptive or misleading in material facts or deliberately conceal any material facts, to induce another person to invest in, or become a member or participant of any unregulated deposit scheme.

The Bill also said that its provisions will not apply to deposits taken in the ordinary course of business. In other words, the Bill allows genuine businesses and individuals can borrow money from their relatives or friends to tide over a crisis or for personal reasons.The Bill provides for deterrent punishment for promoting or operating an unregulated deposit-taking scheme.

It also prescribes punishment for fraudulent default in repayment to depositors. Imprisonment could be up to 10 years or/and fine up to Rs10 lakh. Some offences such as operating unregulated deposit will be cognizable and non-bailable. There will be designated court to deal with such matters. The Bill talks about priority of depositors’ claim. It means 'any amount due to depositors from a deposit taker shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the appropriate Government or the local authority.'

The Bill also empowers the Central government to designate an authority which will create, maintain and operate an online database for information on deposit takers operating in India.

The non-banking entities are allowed to raise deposits from the public under the provisions of various statutes enacted by the Centre and States. However, the regulatory framework for deposit taking activity in the country is not seamless.

The regulators operate in well defined areas within the financial sector by regulating particular kinds of entities or activities. For instance, non-banking finance companies are under the regulatory and supervisory jurisdiction of the Reserve Bank of India.

Similarly, chit funds and money circulation, including multi-level marketing schemes and schemes offered by co-operative societies, are under the domain of the respective State Governments.

In the same manner, the Collective Investment Schemes come under the purview of the Securities and Exchange Board of India.

BJP members Nishikant Dubey, Rajiv Pratap Rudy, Sriniwas Kesineni of TDP, Bhartruhari Mahtab of Biju Janata Dal and RSP's N K Premachandran also spoke. (UNI)