There has been a lot of hues and cry on the recently introduced ordinance by present government on the totally unorganized and get the unregulated field of Deposit Schemes and Arrangement with Ponzi schemes. This is actually a very good step in the direction to protect small savings and deposits which are generally inverted and lost in such schemes. it seems to be a very humble attempt to protect small depositors by regulating such schemes. The ordinance nowhere stops the business of even running any deposit schemes but simply tries to bring them on a platform of a Regulated Schemes and be a watchdog for the same with a sole motive to protect depositors.
However, it seems that Whatsapp Forwards have added pain to the wound by circulating totally misunderstood and misconceived versions of the ordinance. People are also trying to compare the rightly placed ordinance with Demonetisation saying this is another jerk by the government. There seems to be a grave need to let people know the objective analysis of substantive provisions of the ordinance.
This small and quick study is a very basic and humble attempt to decode and decipher only the substantive and operative portion of the ordinance to set the wrong and ill-conceived notions and apprehensions of citizens of India to naught and allay all wrong fears of genuine and tax paying citizens and business fraternity. Here we go and analyze the substantive portion of the ordinance with this mindset.
1. Chapter II, vide section 3 actually is the operative portion of the ordinance which contains the object and operation of the ordinance..
2. 3(a) says that the Unregulated Deposit Schemes shall be banned. This also means that if some genuine scheme or arrangement accepting deposits is ready to be regulated, even they have no issues.
Section 2(17) defines the Unregulated Deposit Scheme in an exhaustive manner saying it is a scheme or an arrangement under which deposits are accepted or solicited by a deposit taker by way of business and it is not a regulated deposit scheme as specified under column 3 of Schedule I. So, this seems to be covering only a scheme or arrangement doing business of accepting deposits.
So, if as a deposit taker you are neither accepting or soliciting deposits in a scheme or an arrangement as your business of accepting deposit or soliciting deposits, there seems to be no issue… Mere and simple business or personal loans for business or personal use are not covered because they are not deposits accepted as a part of accepting or soliciting deposits as a part of any scheme or arrangement as a business.
Now let us read clause (b) of section 3 which predominantly prohibits a deposit taker to promote, operate or issue any advertisement soliciting participation or enrolment in or accept deposits in pursuance of an Unregulated Deposit Scheme.
However, to reiterate, if one gets his scheme or arrangement registered with appropriate authority, the deposit scheme, even this ban or prohibition shall not apply…so now if one is running business of accepting deposits for interest or any consideration in kind, they need to register and be a Regulated Deposit Scheme instead of remaining an Unregulated Deposit Scheme and thereby they will also be able to carry out their such business not effected by either 3(a) or (b) of the ordinance…further we can also, therefore, conclude that normal business loans or personal loans are not banned or affected by 3(a) or (b) of the ordinance and so till now the public fear of no one can accept any deposit or loan from anyone is completely misplaced or non existent..
Section 3 of chapter II contains banning and prohibitions on Unregulated Deposits…if one registers the scheme then it becomes Regulated Deposit and will then have to follow code and governance enshrined in section 4 onwards.
Let us now see what an operator of Regulated Deposit Scheme operator should do or not do to avoid any penal action under the ordinance..
Section 4 says the operator will not make any default in repayment or return of deposit at the time of maturity or any default in any specified performance or promise during the operating of a regulated deposit scheme..thus this section is purely for protection of small deposits placed with any Regulated Deposit Scheme. So, even this section has nothing to do whatsoever with normal business or personal loan transactions happening in India….
Section 5 further protects depositors by prohibiting any person from knowingly making any statement, promise or forecast which is false or deceptive or misleading in material facts or deliberately conceal any material facts with a view ti induce any other person to invest in or become a member or participant of any Unregulated Deposit Scheme. Thus, the wrongful marketers or deceitful people may not influence any other person to induce or cheat by making wrong or false or deceitful statements or facts about some Unregulated Deposit Scheme. Again this is purely to save depositors from being cheated by such schemes..
Section 6, which is the last substantive or operative part of the Chapter II is very specific and deals with a prize chit or a money circulation scheme banned under the provisions of Prize Chits and Money Circulation Scheme (Banning) Act, 1078 and considers all such schemes as Unregulated Deposits Schemes under this ordinance thereby also saving depositors from such schemes…again this has nothing to so with any personal or business loan or deposits…
So, in sum and substance, since the whole substantive portion nowhere restricts any personal and business loans, the media and WhatsApp induced misplaced and wrongful fear that no one will be able to take any loan or deposit for personal or business purposes after introduction of this ordinance is totally wrong and there is no such fear at all…Let experts read and decode, decipher, demystify such ordinances, acts, bills and then plan. Soon we shall have clarifications from reliable sources, understand, grasp and then educate others so that the atmosphere of forwarding induced distress is not created..
The purpose of this very quick review of operative and substantive provisions of this provision is to allay fear of genuine business fraternity as businesses and families in India run on loans, deposits, gifts and various other such legitimate sources of funds in addition to banking and other financial assistance from non-banking financial institutions.