NEW DELHI: The government on Tuesday decided to propose a jail term of up to seven years for those running unregulated deposit or Ponzi schemes, while giving priority to the claims of depositors over those of the government or banks in insolvency cases.
The Bill - piloted by the department of financial services - has proposed that all deposit-taking entities, including authorised players, need to register with a designated agency once the law is enacted and notified and there will be a ban on all "unregulated deposit takers". A database of deposit takers is also proposed to be created and anyone flouting the guidelines will face strict punishment, including a jail term.
A graded punishment has been proposed. Those soliciting unregulated deposits will face a jail term of one to five years. Unregistered entities, which are accepting deposits, will be liable for up to seven years in jail. Those who default on repayment of unregulated deposits will have to face an additional term of three years, a source told TOI.
At the same time, the government has decided to keep cryptocurrency outside the ambit of the legislation, indicating that it will be dealt with as a payment tool. Under the current legislative framework, bitcoins and similar payment instruments are not legal in India.
The proposals are part of the Banning of Unregulated Deposit Schemes Bill, cleared by the Cabinet and due to be introduced in Parliament. "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," the government said.
Several unregulated schemes, including some run by Sahara and others such as Sharad Group have seen thousands of investors lose money, prompting the government to propose a new law to ensure that wrongdoers do not get away by taking advantage of legal loopholes.
Sources said in case of companies facing action under the Insolvency & Bankruptcy Code or the Sarfaesi Act, the interest of depositors will be kept as paramount and the agency responsible for protecting the interest of depositors will issue instructions to ensure that funds are set aside. The bill has proposed that competent authorities be set up by state governments.
The Bill - piloted by the department of financial services - has proposed that all deposit-taking entities, including authorised players, need to register with a designated agency once the law is enacted and notified and there will be a ban on all "unregulated deposit takers". A database of deposit takers is also proposed to be created and anyone flouting the guidelines will face strict punishment, including a jail term.
A graded punishment has been proposed. Those soliciting unregulated deposits will face a jail term of one to five years. Unregistered entities, which are accepting deposits, will be liable for up to seven years in jail. Those who default on repayment of unregulated deposits will have to face an additional term of three years, a source told TOI.
At the same time, the government has decided to keep cryptocurrency outside the ambit of the legislation, indicating that it will be dealt with as a payment tool. Under the current legislative framework, bitcoins and similar payment instruments are not legal in India.
The proposals are part of the Banning of Unregulated Deposit Schemes Bill, cleared by the Cabinet and due to be introduced in Parliament. "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," the government said.
Several unregulated schemes, including some run by Sahara and others such as Sharad Group have seen thousands of investors lose money, prompting the government to propose a new law to ensure that wrongdoers do not get away by taking advantage of legal loopholes.
Sources said in case of companies facing action under the Insolvency & Bankruptcy Code or the Sarfaesi Act, the interest of depositors will be kept as paramount and the agency responsible for protecting the interest of depositors will issue instructions to ensure that funds are set aside. The bill has proposed that competent authorities be set up by state governments.
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