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Unregulated Deposit Schemes and Chit Funds (Amendment) Bill, 2018

Unregulated Deposit Schemes and Chit Funds (Amendment) Bill, 2018

In the backdrop of several ponzi schemes duping gullible investors surfacing in recent years, the Union Cabinet on Tuesday decided to bring a bill in Parliament to ban unregulated deposit schemes. To protect the saving of the investors, two bills have been introduced in the parliament:

(a) Banning of Unregulated Deposit Schemes Bill, 2018 in parliament

(b) Chit Funds (Amendment) Bill, 2018

Unregulated Deposit Schemes Bill, 2018

The bill is aimed at tackling the menace of illicit deposit taking activities in the country. Companies/ institutions running such schemes exploit existing regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard-earned savings.

Features:

  • Complete prohibition of unregulated deposit taking activity.
  • Deterrent punishment for promoting or operating an unregulated deposit taking scheme.
  • Stringent punishment for fraudulent default in repayment to depositors.
  • Designation of a Competent Authority by the State Government to ensure repayment of deposits in the event of default by a deposit taking establishment.
  • 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.

Chit Funds (Amendment) Bill 2018

In order to facilitate orderly growth of the Chit Funds sector and remove bottlenecks being faced by the Chit Funds industry, the following amendments to the Chit Funds Act, 1982 have been proposed:

  • Use of the words "Fraternity Fund" for chit business under Sections 2(b) and 11(1) of the Chit Funds Act, 1982, to signify its inherent nature, and distinguish its working from "Prize Chits" which are banned under a separate legislation.
  • While retaining the requirement of a minimum of two subscribers for the conduct of the draw of the Chit and for the preparation of the minutes of the proceedings, the Chit Funds (Amendment) Bill, 2018 proposes to allow the two minimum required subscribers to join through video conferencing duly recorded by the foreman, as physical presence of the subscribers towards the final stages of a Chit may not be forthcoming easily.
  • The foreman shall have the minutes of the proceedings signed by such subscribers within a period of two days following the proceedings.

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