Amendments to existing lawsLegislation Updates

Rajya Sabha passed the Banning of Unregulated Deposit Schemes Bill, 2019 yesterday, i.e. 29-07-2019, which would now replace the Ordinance promulgated on 21-02-2019.

The Bill “seeks to provide for a comprehensive mechanism to ban the unregulated deposit schemes other than deposits taken in the ordinary course of businesses and to protect the interest of depositors.”

It has been stated that, the bill would target to protect the interests of the poor people. The Bill further targets to address the problem of “Ponzi Schemes” and the adverse effects attached to it.

Understanding of “Ponzi Schemes”:

Ponzi scheme is an investment scam that pays existing investors out of money invested by new investors, giving the appearance of earnings and profits where there are none. Ponzi schemes are also known as pyramid schemes.

As defined by Investor.gov, Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves.

With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse.

Ponzi schemes are named after Charles Ponzi, who duped investors in the 1920s with a postage stamp speculation scheme.

Few of the recent examples of the same is of  Speak Asia, PACL Ltd., IMA Scam in Karnataka

PACL Ltd.

A milk seller named Nirmal Singh Bhangoo was the founder of PACL Ltd., the known as Gurwant Agrotech. It was further reported in this case, that PACL was involved in a Ponzi scheme scam of Rs 45,000 crore and in that regard, CBI had arrested Nirmal Singh Bhangoo along with 3 other people in this connection. For about 55 million investors were duped who had joined the scheme.

Therefore, the said bill passed by Rajya Sabha is said to cover illegal Ponzi Schemes and would help to protect the investors unaware of the same.


UPDATE: The Banning of Unregulated Deposit Schemes Act, 2019 receives president’s assent on 31-07-2019


*Please refer to the Act here: The Banning of Unregulated Deposit Schemes Act, 2019