Government has put a ban on Unregulated Deposit Schemes through Unregulated Deposit Schemes Ordinance, 2019. The move in all is an attempt to safeguard gullible investors from yielding in to ponzi and pyramid schemes.
Several jewelers incorporated under the Companies Act 2013 take monthly deposits. The tenure is usually 11 months, with the jeweler waiving off the deposit for the 12th month or not charging making expenses. These jewelers show these deposit as advance against sales and these are unregulated deposits. After enforcement of this ordinance jewelers will not be able to take these type of deposits.
The ordinance allows to take loan from close relatives i.e. father, mother, brother, sister, spouse, son, son’s wife, daughter’s wife, step father, step mother, step son, step sister, step brother and spouse of step son, sister and brother.
There is also no ban on taking loan from member of HUF. Partner of a partnership firm can obtain loan from their relatives. Hence there will be no ambiguity about the source of the fund. The people who are giving their funds to a person are well known to them or part of the family.
This ordinance is also not creating a hurdle in genuine business needs. Hence no banning on the taken from banks, financial institutions, NBFC, public financial institution, amount received as credit by a buyer from seller on sale of any movable or immovable property, security or dealership deposited for performance of contract and payment, advance or part payment for the supply or hire of goods or provision of services.
But if a deposit taker fails to obtain permission/approval under law and hence not able to complete the obligation for which he has taken security, advance or dealership deposit and amount becomes due it will be the responsibility of deposit taker to refund the deposit within 15 days of such due. If the amount is not being paid the same will be considered as unregulated deposit.
No banning has been done for amounts received from foreign Governments, foreign or international banks, multilateral financial institutions, foreign Government owned development financial institutions, foreign export credit collaborators, foreign bodies corporate, foreign citizens, foreign authorities or persons resident outside India subject to the provisions of the Foreign Exchange Management Act, 1999 and the rules and regulations made there under.
Ordinance has also kept asset reconstruction companies (registered with RBI), periodic payments made by members of self help groups (within specified limit), amount accepted by a political party under section 29B of the Representation of the People Act, 1951out of the purview of the ordinance.
A separate mechanism has been made to trace out the unregulated deposits besides this where the principal officer of any banking company, a corresponding new bank, the State Bank of India, a subsidiary bank, a regional rural bank, a co-operative bank or a multi-State co-operative bank has reason to believe that any client is a deposit taker and is acting in contravention to the provisions of this Act, he shall forthwith inform the same to the Competent Authority.
| Soliciting unregulated deposits | Imprisonment from 1to 5 years Fine of Rs. 2 to 10 Lakh |
| Accepting unregulated deposits | Imprisonment from 2 to 7 years Fine of Rs. 3 to10 Lakh |
| Accepting unregulated deposits and committing fraudulent default in repayment | Imprisonment from 3 to 10 years Fine of Rs. 5 Lakh to twice of deposits collected in scheme |
| Fraudulent default in regulated deposit scheme | Imprisonment of 7 years Fine of Rs. 5 Lakh to 25 crore or three times of amount of profit made whichever is higher |
| Wrongful inducement in unregulated deposit scheme | Imprisonment from 1to 5 years Fine of Rs. 10 Lakh |
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