Cabinet may clear bill to regulate deposit schemes

The Union Cabinet is expected to clear a bill to ban unregulated deposit schemes in the wake of Ponzy schemes and virtual currencies such as Bitcoins threatening to siphon off hard earned money of unsuspecting people.

The Banning of Unregulated Deposit Schemes and Protection of Depositors' Interest Bill may be cleared by the Cabinet in its meeting on Tuesday. The government has decided to introduce the bill in the second leg of Budget session beginning March 5.

Once cleared, the new law will have stringent penal provisions, including imprisonment for a minimum of three years, which can be extended to 10 years, for running such deposit schemes.

'Deposit' under the new law has been described as money taken by way of advance or loan or any other form and returned in a specified period or otherwise in cash or kind, or in the form of a specified service with or without any benefit - interest, bonus, profit or any other form. All unregulated deposit schemes will come under this law.

Heavy fine

For default in repayment or return of deposits on maturity, the law proposes jail of up to 7 years or fine of not less than Rs 5 lakh or three times the amount of profits made out of such defaults, whichever is higher, or both.

The law also proposes setting up an empowered committee for arbitration in case of any dispute over the jurisdiction of regulators over a particular scheme.

If the new law is passed by Parliament, it will spell bad news for virtual currencies like Bitcoin, which the government maintains is a kind of ponzy scheme that can swindle people's deposits after paying interest for a certain period and taking them into confidence.