In a bid to protect the savings of the investors, Union Cabinet chaired by the Prime Minister Narendra Modi has given its approval to introduce Banning of Unregulated Deposit Schemes Bill, 2018 and Chit Funds (Amendment) Bill, 2018 in Parliament.
Banning of Unregulated Deposit Schemes Bill, 2018 – Salient Features:
Main objective to introduce this bill is to tackle the menace of illicit deposit taking activities across India by plugging the existing regulatory gaps and implement strict administrative measures.
- The bill contains a banning clause which bans Deposit Takers from promoting, issuing advertisements, operating and accepting deposits in any Unregulated Deposit Scheme.
- Running of Unregulated Deposit Schemes, fraudulent default in Regulated Deposit Schemes, and wrongful inducement in relation to Unregulated Deposit Schemes have been categorised as punishable offences.
- Offenders under the provisions of this bill will be subjected to severe punishment and heavy pecuniary fines.
- The bill comprehensively defines the terms “Deposit Taker” and “Deposit”. The term unregulated ‘Deposit Taker’ excludes entities that are incorporated by legislation and ‘Deposit’ excludes money accepted by an establishment in the ordinary course of its business.
- Government’s plan to bring in comprehensive central legislation to deal with illegal deposit schemes was first announced during Budget Speech 2016-17 by Finance Minister Arun Jaitley.
Chit Funds (Amendment) Bill, 2018 – Salient Features:
Main objective behind this bill is to facilitate orderly growth of the Chit Funds sector and remove challenges being faced by the Chit Funds industry.
- Words “Fraternity Fund” should be used for chit business in order to signify its inherent nature, and distinguish its working from “Prize Chits”.
- “Prize Chits” have been banned through a separate legislation.
- Provision of having minimum two subscribers for the conduct of the draw of the Chit, as specified in Chit Funds Act, 1982 has been retained.
- Ceiling of one hundred rupees will be removed and State Governments will be allowed to prescribe the ceiling and to increase it from time to time.
- The bill also contains provision for increasing the ceiling of foreman’s (person/entity who manages the chit fund) commission.