Capital Markets: Challenges and Developments

Banning of Unregulated Deposit Schemes Bill, 2018


Mains Paper 2: Polity | Parliament & State Legislatures – structure, functioning, conduct of business, powers & privileges & issues arising out of these

From UPSC perspective, the following things are important:

Prelims level: Chit Funds (Amendment) Bill, 2018, Banning of Unregulated Deposit Schemes Bill, 2018

Mains level: Illicit deposit schemes spreading across the country and measures to curb them

Bill to regulate illicit deposit schemes

  1. The Union government has come up with two bills to tackle the menace of non-regulated deposit schemes
  2. The Chit Funds (Amendment) Bill, 2018 was introduced in the Lok Sabha during the second leg of the Budget Session
  3. The second Bill is Banning of Unregulated Deposit Schemes Bill, 2018

Provisions of the bill

  1. The proposed Bill aims to provide a comprehensive legislation to tackle illicit deposit schemes by completely prohibiting such activities
  2. Nine regulators including the RBI, SEBI, the Ministry of Corporate Affairs, and the State governments regulate financial activities
  3. According to the Bill, all deposit-taking schemes are required to be registered with the relevant regulator, failing which the “Deposit Takers” will be considered “unregulated” and hence be banned
  4. 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
  5. A ‘Competent Authority’ will be appointed which has the powers similar to a civil court, including powers to attach properties of the deposit takers
  6. It also empowers police to search and seize any property believed to be connected with an offence under the Bill, with or without a warrant
  7. The Bill enables the creation of an online central database, for collection and sharing of information on deposit-taking activities in the country


  1. “Deposit Takers” include all possible entities (including individuals) receiving or soliciting deposits, except specific entities such as those incorporated by legislation
  2. “Deposit” is defined in such a manner that deposit takers are restricted from camouflaging public deposits as receipts, and at the same time not to curb or hinder acceptance of money by an establishment in the ordinary course of its business
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