Cabinet approves new bill to ban Unregulated Deposit Schemes and Chit Funds (Amendment) Bill, 2018

Feb 20, 2018 | by Avantis RegTech Legal Research Team

A |  A

In a major policy initiative to protect the savings of the investors, the Union Cabinet has given its approval to introduce the following bills in the Parliament:-

Banning of Unregulated Deposit Schemes Bill, 2018 is aimed at tackling the menace of illicit deposit taking activities in the country. Companies/ institutions running such schemes exploit existing regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard-earned savings. The Banning of Unregulated Deposit Schemes Bill, 2018 will provide a comprehensive legislation to deal with the menace of illicit deposit schemes in the country through,

The salient features of the Bill are as follows:

·       The Bill contains a substantive banning clause which bans Deposit Takers from promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit Scheme. The principle is that the Bill would ban unregulated deposit taking activities altogether, by making them an offence ex-ante, rather than the existing legislative-cum-regulatory framework which only comes into effect ex-post with considerable time lags.

·       The Bill creates three different types of offences, namely, running of Unregulated Deposit Schemes, fraudulent default in Regulated Deposit Schemes, and wrongful inducement in relation to Unregulated Deposit Schemes.

·       The Bill provides for severe punishment and heavy pecuniary fines to act as deterrent.

·       The Bill has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.

·       The Bill provides for attachment of properties/ assets by the Competent Authority, and subsequent realization of assets for repayment to depositors.

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

·       The Bill enables creation of an online central database, for collection and sharing of information on deposit taking activities in the country.

The Chit Funds (Amendment) Bill, 2018 is introduced in the parliament in order to facilitate orderly growth of the Chit Funds sector and remove bottlenecks being faced by the Chit Funds industry, thereby enabling greater financial access of people to other financial products, the following amendments to the Chit Funds Act, 1982 have been proposed:

·       While retaining the requirement of a minimum of two subscribers for the conduct of the draw of the Chit and for the preparation of the minutes of the proceedings, the Chit Funds (Amendment) Bill, 2018 proposes to allow the two minimum required subscribers to join through video conferencing duly recorded by the foreman, as physical presence of the subscribers towards the final stages of a Chit may not be forthcoming easily. The foreman shall have the minutes of the proceedings signed by such subscribers within a period of two days following the proceedings;

·       Increasing the ceiling of foreman's commission from a maximum of 5% to 7%, as the rate has remained static since the commencement of the Act while overheads and other costs have increased manifold;

·       Allowing the foreman a right to lien for the dues from subscribers, so that set-off is allowed by the Chit company for subscribers who have already drawn funds, so as to discourage default by them; and

·       Amending Section 85 (b) of the Chit Funds Act, 1982 to remove the ceiling of one hundred rupees set in 1982 at the time of framing the Chit Funds Act, which has lost its relevance. The State Governments are proposed to be allowed to prescribe the ceiling and to increase it from time to time.

[Release ID: 1521027]

 

URL: http://www.pib.nic.in/PressReleseDetail.aspx?PRID=1521027


Bookmark

Related Updates



Alternate Text

Get updates on the go on RuleZbook Mobile App.