Reacting to “The Banning of Unregulated Deposit Schemes Ordinance 2019” recently promulgated, Satish Marathe, RBI Board member and a senior cooperator said the Ordinance is directed against Ponzi schemes and is a welcome move on the part of the GOI.
“As Sahakar Bharati members we endorse the GOI action which will protect small depositors”, he added. Marathe also pointed out that similar laws exist in almost all developed and financially well-regulated jurisdictions.
It bears recall that the Government has issued The Banning of Unregulated Deposit Schemes Ordinance 2019 recently pursuant to which an Individual or group of individuals cannot take any deposit or loan from any person other than relatives. Partnership firms can take deposit or loan from relatives or partner or partners only.
Significantly, the law prohibits deposits by non-voting members in multi-state cooperative societies. Based out of various states, such societies, along with chit funds — masquerading as quasi-banks — are suspected to have raised large amounts that are then lent to companies and entities that serve as fronts for political funding.
In enforcing the ban, the ordinance has brought about amendments to the Reserve Bank of India Act, 1934, and Multi-State Cooperative Society Act, 2002, to explicitly state that “a multi-state cooperative society shall not be entitled to receive deposits from persons other than voting members”.
Acceptance of unregulated deposits could cause attachment and freezing of assets and even imprisonment — with ‘deposit’ defined as money received by way of advance or loan or in any other form by any deposit taker with a promise to return either in cash or kind or in the form of a specified service.
“Multi State Co-ops can lend to only Shareholders/Members who can participate/vote in the Election of BOD. This has been the law after a SC judgement in case related to a Co-op Credit Society. This judgment is equally applicable also to a Credit Co-op registered under any State Co-op Act”, Marathe explained.
“This case comes post IMG Report which estimated a loot of a whopping Rs 65000 crore from innocent and hapless small investors”, he underlined.