Banning of Unregulated Deposit Schemes Bill, 2018


Instances of people losing their hard-earned money to Ponzi schemes keep coming to light. The Banning of Unregulated Deposit Schemes Bill, 2018 was approved by the Union Cabinet to provide comprehensive legislation to deal with illicit deposit schemes in the country.

About the Bill:

  1. The Bill imposes complete prohibition of unregulated deposit taking activity.
  2. Primarily, the Bill defines the “deposit taker” and “deposit” comprehensively.

Some provisions include:

  • 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
  • Powers and functions of the competent authority including attachment of assets of a defaulting establishment
  • Designation of courts to oversee repayment of depositors and to try offences under the Act, and
  • Listing of Regulated Deposit Schemes in the Bill with a clause enabling the Central government to expand or prune the list.
  1. The Bill contains a substantive banning clause which bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit Scheme.
  2. The primary responsibility of implementing the provisions lies with the State governments.
  3. It provides for severe punishment and heavy pecuniary fines to act as deterrent.
  4. It has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
  5. The Bill provides for attachment of properties/ assets by the competent authority, and subsequent realisation of assets for repayment to depositors.
  6. Clear-cut time lines have been provided for attachment of property and restitution to depositors.
  7. The Bill enables creation of an central online database, for collection and sharing of information on deposit taking activities in the country. Primarily, the Bill defines the “deposit taker” and “deposit” comprehensively.
  8. The primary responsibility of implementing the provisions of the proposed legislation lies with the State governments.

Types of offences:

The Bill specifies three different types of offences:

  • Running of Unregulated Deposit Schemes,
  • Fraudulent default in Regulated Deposit Schemes, and
  • Wrongful inducement in relation to Unregulated Deposit Schemes.


Leave a Reply