The Centre on Thursday unveiled a draft Bill that proposed stringent laws to clamp down on Ponzi schemes, including up to 10 years’ imprisonment for wrongdoers and confiscation of assets of firms found to have accepted deposits without authorisation.
Clearly differentiating regulated and unregulated deposit-taking, the group mooted a comprehensive central law — “Banning of Unregulated Deposit Schemes and Protection of Depositors’ Interests Bill, 2016” — under which specified offences will be cognisable and non-bailable. Comments on the draft Bill, put up in the public domain, can be made until December 17, 2016.
The proposed Act with eight chapters and 40 sections would override a clutch of existing laws, including those framed by the states. It proposes prison terms of 1-5 years and up to 10 years for repeat offenders, besides fines for wrongfully inducing people to unlawful schemes. Directors and officials of such companies would be prosecuted.
The proposed law defines ‘deposit’ as receipt of money by way of advance or loan or any other form and returned in a specified period or otherwise in cash or kind or in the form of a specified service with or without any benefit – interest, bonus, profit or any other form. The objective of the proposed Act is to protect the interest of depositors by providing a comprehensive Code to ban unregulated deposit schemes.
The Bill proposes that district magistrates, to be made as competent authority under the Act by states, could order investigation of any company or individual on their assets and documents.
Currently, the regulatory framework for deposit taking activity is fragmented with regulatory overlaps, which is exploited by unscrupulous people. There are various statutes in the country that allow non-bank entities to raise money from public.
According to a CBI estimate, R68,000 crore have been collected from more than six crore depositors by such deposit taking entities using a large network of commission agents promising high returns. However, the CBI has said there has been no study or authentic estimate of the real size of such deposit taking activity across the country.