Deposit schemes, return-offers from jewelers, realtors may soon be banned
The Union Cabinet has cleared the Banning of Unregulated Deposit Schemes Bill, 2018 to be introduced in Parliament; it seeks to ban dubious schemes and punish those running such scams. The government will crack down on companies/entities operating unregulated schemes like real estate developers offering assured returns to investors until possession and installment schemes for buying gold by jewelers. Here's all about it.
Fixed returns until possession and other offers by realtors
There are many real estate developers, especially those who are "starved of cash" from lenders, who offer assured returns of 12-14% to the investors till possession of property; some realtors even seek investments from customers, promising attractive returns. Despite attempts to prevent them even in the past, such unregulated offers and schemes have not only continued but also expanded in the realty sector.
Received complaints against realty developers from several investors
Senior government officials said that the deposit-seeking schemes run by real estate developers are a "grey area," as the regulations still remain unclear; they added that these schemes need to be regulated. They said many investors had been cheated by the unregulated, Ponzi schemes offered by the developers who promise attractive returns to customers but the payment stops after the initial few months.
Need to regulate deposit schemes
"Many investors, especially in (West) Bengal, Odisha, and Jharkhand, have burned their fingers and they are poor people. We have received several complaints from Noida and nearby towns too about real estate sector. It is important to regulate them (deposit schemes)," said a senior official.
Monthly installment schemes for buying jewelry
Many jewelry companies, including some renowned brands, run one-year installment gold-buying schemes, which may be banned under the proposed law. Some allow customers to pay 11 installments while the 12th one is paid by the company; the invested amount can be used for buying gold. Some jewelers require investors to pay ten monthly installments to get up to 50-60% discount on their monthly contribution.
What exactly does the Unregulated Deposits Bill propose?
The Bill proposes some stringent "penal provisions" against those running dubious deposit schemes, including up to seven years' imprisonment for running unregistered schemes. It also requires all the regulated deposit-taking entities and deposit-seekers to register with a new designated authority proposed under the Bill. With this new legislation, the government aims to plug the loopholes and protect the investors and depositors.
Bill may also affect cryptocurrency traders
The new Cabinet-approved Bill could be bad news for cryptocurrency dealers and investors as it may ban these virtual currencies, too. The government is against trading in cryptocurrencies like Bitcoin. In fact, Finance Ministry likened virtual currencies to "Ponzi schemes" last year, warning investors of the potential risks involved. While presenting Budget-2018, Arun Jaitley reiterated the government wouldn't consider cryptocurrencies as legal tender.Share this timeline