The Banning of Unregulated Deposit Schemes Act, 2019

The Banning of Unregulated Deposit Schemes Act, 2019 (Act No. 21 of 2019) aims to provide a comprehensive mechanism for banning unregulated deposit schemes and protecting the interest of depositors. The Act extends to the whole of India except the State of Jammu and Kashmir.

Key provisions include:

• Banning of Unregulated Deposit Schemes: The Act bans unregulated deposit schemes, effective from the date of its commencement.


• Fraudulent Default in Regulated Deposit Schemes: No deposit taker can commit fraudulent default in repayment or return of deposits on maturity.


• Wrongful Inducement in relation to Unregulated Deposit Schemes: No person can knowingly make false statements or promises to induce another person to invest in an unregulated deposit scheme.


• Certain Scheme to be Unregulated Deposit Scheme: Prize chits and money circulation schemes banned under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978, are deemed unregulated deposit schemes.

The Act establishes authorities such as the Competent Authority and Designated Court to enforce its provisions. The Central Government designates an authority to create and maintain an online database for information on deposit takers. Deposit takers must intimate their business to the Competent Authority.

Key features of the Act include:

• Priority of depositors' claims: Amounts due to depositors from a deposit taker shall be paid in priority over other debts.


• Precedence of attachment: An order of provisional attachment passed by the Competent Authority has precedence and priority over any other attachment.


• Application for confirmation of attachment and sale of property: The Competent Authority can apply for making the provisional attachment absolute, and the Designated Court may direct the sale of attached assets.

The Act also provides for powers of the Designated Court, including approving statements of dues, assessing asset values, and directing possession and sale of assets.