Bill passed to curb ponzi schemes, protect investors

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Published: July 30, 2019 1:41:11 AM

The Banning of Unregulated Deposit Schemes Bill, 2019, which was approved by the Lok Sabha on July 19, got the nod of the Rajya Sabha after political parties across the board supported the move to curb fly-by-night operators.

The new law makes specified offences cognisable and non-bailable.

To protect savings of gullible investors, Parliament on Monday approved a new law to clamp down on ponzi schemes which, inter alia, provides for imprisonment up to 10 years for wrongdoers and confiscation of assets of firms found to have accepted deposits without authorisation.

The Banning of Unregulated Deposit Schemes Bill, 2019, which was approved by the Lok Sabha on July 19, got the nod of the Rajya Sabha after political parties across the board supported the move to curb fly-by-night operators.

The new law makes specified offences cognisable and non-bailable. It has provision of prison terms of one-10 years for offenders, besides fines of up to Rs 50 crore for wrongfully inducing people to unlawful schemes. Directors and officials of such companies will also be prosecuted. The comprehensive Union law adopts best practices from state laws and entrusts the primary responsibility of implementing the provisions of the new legislation with the state governments.

According to a CBI estimate in 2016, Rs 68,000 crore was collected from more than six crore depositors by such illegal 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. The new law states that the first claim on the recovered money would be of depositors.

To address genuine concerns, it would ensure that no hardship is caused to genuine businesses or to individuals borrowing money from their relatives or friends for personal reasons or to tide over a crisis.

The Banning of Unregulated Deposit Schemes Ordinance, 2019 was promulgated on February 21, 2019. Previously, a similar Bill was passed by Lok Sabha on February 13, 2019. However, it lapsed with the dissolution of the 16th Lok Sabha.

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