Author: CA Paras F. Jain
Key Highlights on the Banning of Unregulated Deposit Schemes Ordinance, 2019
- From which date this Ordinance is applicable?
- This ordinance is applicable from 21st February, 2019; being the date on which the ordinance was published in the official gazette of India.
2. Does this Ordinance is applicable to whole of India?
- It is applicable to whole of India except Jammu & Kashmir.
3. Does this Ordinance have retrospective effect?
- The ordinance has prospective effect. It is applicable to the transactions done on or after 21/02/2019.
4. What are the reasons behind introducing this Ordinance?
According to the Report issued in January, 2019 by the Standing Committee of Finance, following are the major reasons:
- The instances of people being defrauded by illicit deposit schemes were increasing across the India.
- The poor and gullible people were the major victims who were getting duped by such illicit unregulated deposit schemes.
- There is no Central legislative regulatory body or Central Act governing such unregulated deposit taking schemes.
5. Examples of Unregulated deposit schemes which are currently on going and intended to be banned by Government:
- Ponzi Schemes.
- 1 ka 3, 1 ka 2 Schemes.
- Monthly money deposit schemes being run by the big Jewelers.
- Unregistered Money Lenders.
6. To whom this ordinance is not applicable?.
- Any amount received as loans or deposits in the ordinary course of business are not covered under this ordinance.
- Any amount received as loans or deposits under any regulated deposit scheme.
For E.g.: Scheduled bank or co-operative bank, Public Financial Institutions, SEBI, RBI, IRDA, NHB, EPFO, etc.
7. Is this Ordinance applicable to personal transactions?
- This ordinance is not applicable to any amount received as personal loans or gifts if they are not being considered as any scheme or arrangement as defined in the ordinance.
8. To whom this ordinance is applicable?
- This Ordinance is applicable to those persons who receives any amount as loans or deposits under any scheme or arrangement or who solicits the same by way of business and which is not a Regulated Deposit Scheme.
9. What are the consequences in case of violation of any provisions of this Ordinance?
- Any deposit taker who contravenes the provisions of this ordinance can be penalized up to Rs 10 Lakhs including attachments of properties and imprisonment up to 10 years.
[Edition 1 dated 25/02/2019]
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Disclaimer: This Updates is for private circulation only. It is only for information and does not constitute to be an advice or opinion in any manner. The circulation of this update does not intend to solicit work. The information has been derived from THE BANNING OF UNREGULATED DEPOSIT SCHEMES ORDINANCE, 2019, REPORT OF THE STANDING COMMITTEE OF FINANCE and other authoritative clarifications made by government.