Financial Services Secretary clarifies on Banning of Unregulated Deposit Scheme Ordinance

Financial Services Secretary Rajiv Kumar Friday said the Banning of Unregulated Deposit Scheme Ordinance promulgated will help create a central repository of all the registered entities that can take deposits. The repository will help put a check on illicit deposit-taking activities that dupe the poor and the financially illiterate of their hard-earned savings, he said. The Ordinance makes it absolutely necessary for everyone to register before taking a deposit and creating a central repository of all the registered entities which can take deposits. So, whosoever are not registered are not regulated entities," he said further. Unquote

 

Therefore the objective of this ordinance appears to be banning on Chitfund and deposit schemes operated by illicit enterprises.

 

However section 2(17) od the ordinance defines  “Unregulated Deposit Scheme” means a Scheme or an arrangement under which deposits are accepted or solicited by any deposit taker by way of business and which is not a Regulated Deposit Scheme.

 

Now this definition opens the Pandora’s box . Whether unsecured loans taken by small businesses from unrelated parties and enterprises is also a ARRANGEMENT, which can be called as scheme ?? and what is the meaning of BY WAY OF BUSINESS , whether individuals, firms having commercial  businesses and accepting unsecured loan is covered ??

 

The ordinance is not applicable Regulated scheme , The “Regulated Deposit Scheme” means the Schemes specified in the First Schedule; This schedule list 9 Acts eg RBI,sebi, state Govt,NHB  Pf etc and also covers sec 74 of Companies act . That means deposit accepted as per companies act are exempt from this ordinance.

 

However there is no  specific exemption to firms,and proprietorship firms.

 

The schedule further gives power to Govt to exempt further schemes by notification and we can expect some relief through notification when final rules are published.

 

 

The ordinance bans deposit takes from accepting deposits . The definationa of “‘Deposit Takers’ include all possible entities (including individuals) receiving or soliciting deposits, except specific entities such as those incorporated by legislation,”