Central Government of India has banned the unregulated deposit schemes by passing a new ordinance. The Union Minister chaired by Prime Minister Narendra Modi approved Promulgation of Unregulated Deposit Schemes Ordinance 2019, earlier this week. On Thursday, President Ram Nath Kovind announced the banning.The bill will affect the P2P lending like the unregulated deposit schemes.
Peer to Peer(P2P) Lending, is the practice of lending money to individuals and businesses through other online services that match lenders with borrowers. The ban does not affect the P2P as whole but it will control the Ponzi schemes in India. This will directly hit the organisations that are promising double, triple and more returns on depositing of INR. The bill mandates the shut down of all unregulated deposit. However, this will not affect the cryptocurrency exchanges that are running as per the standard norms. Earlier this month, Arun Jaitley stated that government will now take measures to eliminate the use of crypto-assets in financing illegal activities.
The man supervising the bill draft R.N. Dubey, Economic adviser of the department of Financial Services says, “Anything which is regulated is legitimate activity, if it is not regulated, it is illegitimate. While Bitcoin or cryptocurrencies are not regulated, the bill doesn’t mandate a ban on cryptocurrency but deposit schemes. Hence, if somebody deposits in the form of cryptocurrency, then the illegal activity will come under the ambit of the bill.”
The other markets that are affected by this ban are Gold deposit schemes. These are schemes where buyers pay every month a certain amount of money to receive a particular designed ornament at end of the year. Now long term plans more than 365 days will be impacted. Only saving plans as advance against sales are allowed and any manner of customised contracts would bring offers under the ambit of deposits will now be banned according to the bill.
According to a ordinance, normal transactions like an individual reaching out to friends for a quick loan to tide over a crisis, a cash-strapped businessman borrowing from an acquaintance to meet a personal obligation; or, a charitable institution funding students and the ailing, cannot be done post this ordinance.