Bhumesh
Banning of Unregulated Deposit Schemes
Bhumesh Verma 2 Sep 2019

Banning of Unregulated Deposit Schemes

Deposit schemes are one of the easiest modes to generate money for the fraudsters. Usually, middle / poor strata of Indian society is an easy target for the fraudsters organizing deposit schemes.

As a common phenomenon, fraudsters initiate a deposit scheme with ridiculous incentives to grab the attention of people. Uninformed people seeking quick and more than decent returns get inclined towards such deposit schemes.

Following the accumulation of the targeted money from the people, these fraudsters abscond with the hard earned money of middle/poor people. These kinds of schemes are being reported in the media on constant basis, with little improvement in greed of people getting cheated.

The Central Government, with the intent to curb the practice of using deposit schemes as a money spinner for fraudsters, has passed Banning of Unregulated Deposit Schemes Bill, 2019.

The underlying intent is to establish a system in place to ensure people (who have deposited their hard earned money in certain unregulated deposit schemes) will recuperate their deposit monies from the organizers of such unregulated deposit schemes.

The system shall firmly deal with the illegal deposit taking activities as certain fraudsters are conning poor/innocent people to generate money by using regulatory gaps to their advantage.

The Bill is the reflection of the central government efforts to recuperate money looted by the fraudsters from common men under the pretext of deposit schemes and based on the certain recommendations made by the inter-ministerial group. 

Under the new law, depositors will have first claim on the recovery money and central/state governments shall be empowered to frame rules to firm handle with the misuse of unregulated deposit schemes.

As per the available data, 978 cases are identified out of which 326 cases are based in West Bengal. 

Apt measures are integrated to develop a regulatory system to abolition the unregulated deposit schemes excluding the deposits procured in regular course of business.

Utmost priority is given to recover the deposits made under unregulated deposit schemes which are pioneered with the intent to generate easy money via unofficial modes.


The offences under the Bill are broadly classified into three categories:

a)     Unregulated deposit schemes operation;

b)     Fraudulent default in regulated deposit schemes; and

c)     Wrongful solicitation/inducement to subscribe the deposits under the unregulated deposit schemes.


Severe punishment will be imposed on the deposit scheme organizers who illegal raised money from common man with the target to loot such common man.

Defaulters will be exposed to severe punishment in the form of imprisonment (1 to 10 years) and pecuniary penalty ranging from Rs 2 lakh to Rs 50 crores.

With this new enactment, depositors will be armored with right weapon to recuperate the deposit money without delay via attachment of defaulters’ assets. There are statutory timelines for assets attachment of defaulters and restitution to depositors.

Accordingly, entities will be entitled to accept deposits from the depositors in their regular course of business for any legitimate purpose. However, there would be prohibitions for the promotion/advertisement of or acceptance of deposits pursuant to unregulated deposit scheme.

Subject to the aforesaid proposition, severe punishment will be imposed on the deposit takers for promotion/advertisement of unregulated deposit scheme or acceptance of deposits under any unregulated deposit scheme.

People who have the intent to lure money from the common man under the pretext of unregulated deposit schemes should be aware of the new regulations and restrain themselves from indulging in any fraudulent acts of soliciting deposits as commission of any such fraudulent acts would land them in jail.

To conclude, the strict enforcement of the new enactment will reduce the occurrence of unregulated deposit schemes and preserve the economic interest of the depositors from the clutches of the deposit takers without diluting the prospect of accepting deposits by entities in regular course of business.

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