Академический Документы
Профессиональный Документы
Культура Документы
Compiled by CS Vanshree Modi
Background
In 2019, it has turned into a reality with the President promulgating the Banning of
Unregulated Deposit Schemes Ordinance, 2019 w.e.f. February 21, 2019 (hereinafter
referred to as 'BUDS Ordinance'). 70th Standing Committee on Finance (2018-19) also
submitted its report in January, 2019.
The BUDS Ordinance has been enforced against need to regulate raising of money from
public and ensuring that the same is allowed in a responsible, accountable and
transparent manner and addressing the violations swiftly. Currently, several regulators
monitor acceptance of public deposits, viz., RBI, NHB, Companies Act, etc. With the
BUDS Ordinance in force, no person can accept deposits unless the same are either
excluded from the meaning of deposits or fall under Regulated Deposit Scheme.
In case of companies, the exclusions from the meaning of deposit shall comprise of those
provided under Rule 2 (1) (c) of the Companies (Acceptance of Deposits) Rules, 2014.
In case of non-banking financial company registered under the Reserve Bank of India
Act, 1934, the expression "deposit" shall have the same meaning as is assigned to it in
clause (bb) of section 45-I of the said Act.
Loan received by an individual from Loan from friends or any person other than relative
relatives. not covered.
Amount received as credit by a buyer In case of credit, there is no money given and,
from a seller of any moveable or therefore, the question of accepting deposit does not
immoveable property. arise.
Amounts received by an Asset Amounts raised by Trusts/SPVs under ARC do not
Reconstruction Company registered seem to get covered.
under the SARFAESI Act, 2002
Amounts accepted by political parties
under Section 29B of the
Representation of the People Act, 1951
Period payment by members of self
help groups within the ceilings
prescribed by the State/Union Territory
Government
Amount received in the course of, or for The list provided thereafter is an inclusive list.
the purpose of, business and bearing a
genuine connection to such business Amounts not specifically covered anywhere else may
including be excluded under this clause only if the amounts
have been received for business and the requirement
Compiled by CS Vanshree Modi
(i) payment, advance or part payment Provided the amounts have not becomes refundable.
for the supply or hire of goods or If the amounts become refundable, it will be deemed
provision of services
as deposits within 15 days from the date on which
(ii) advance received in connection with they become due for refund.
and adjusted against consideration of
an immovable property under an Where the reason for amounts becoming refundable
agreement or arrangement is deposit taker not obtaining necessary permission/
(iii) Security deposit for performance of approval to deal in goods or properties or services
contract for which money is taken, such amounts shall be
(iv) Advance for long-term projects for deemed to be deposits.
supply of capital goods
3. Who will benefit from BUDS Ordinance?
(a) Poor and gullible people who are being duped by illicit deposit schemes
launched by rapacious operators. The Bill will protect them by altogether
banning unregulated deposit taking schemes.
(b) Deposit raising entities which are regulated by and accountable to the
Government or Regulators established by the Government, by increasing public
faith in them.
4. Who will be worst hit by virtue of BUDS Ordinance?
8. The Central Government shall designate an authority for creation, maintenance and
operation of online database of information on deposit takers. The authority may require
other Regulators/ Competent Authority to share information on deposit takers.
Compiled by CS Vanshree Modi
Every deposit taker shall report to the authority about its business in the prescribed
manner.
Onus on principal officer of Banks to inform about its client being a deposit
taker
9. Where the principal officer of any banking company, a corresponding new bank, the
State Bank of India, a subsidiary bank, a regional rural bank, a co-operative bank or a
multi-State co-operative bank has reason to believe that any client is a deposit taker and
is acting in contravention to the provisions of this Act, he shall be required to inform the
same to the Competent Authority.
11. While it does not cover personal loans, amounts taken for personal use, BUDS
Ordinance will surely have a huge impact on the manner of fund raising by unregulated
entities. The punishment for any kind of offence is so serious that one would definitely
want to best avoid the same. This will definitely affect the huge network of informal/
unorganized lending prevalent in the country. While this will result in protection of
investors who get duped, it will also cause a lot of difficulty to the businesses that rely on
such kind of funding.