On Wednesday, the Union Cabinet approved the Banning of Unregulated Deposit Schemes Bill 2019, which aims to prevent unregulated and fraudulent entities from collecting deposits from gullible individuals. If the bill becomes a law, those running illicit deposit schemes could face jail term and penalties.

"The bill will help tackle the menace of illicit deposit-taking activities in the country, which at the present is exploiting regulatory gaps and the lack of strict administrative measures to dupe poor and gullible people of their hard-earned savings," the government said in a release.

The bill will replace the Banning of Unregulated Deposit Schemes Ordinance, 2019, and will be introduced in the ongoing Parliament session.

"The bill will replace the ordinance promulgated on February 21, 2019, which will otherwise cease to operate after six weeks after reassembly of Parliament," the cabinet said in a statement.

There are three different types of offences in unregulated deposit schemes, according to the bill:

• running of unregulated deposit schemes
• fraudulent default in regulated deposit schemes, and
• wrongful inducement

The proposed law will call for the appointment of senior government officials or a 'competent authority' that can attach assets or properties and subsequently realize the assets towards repaying depositors. A provision for creating an online central database to collect and share information on deposit-taking activities in the country was also proposed.

The CBI has lodged about 166 cases in the last four years in relation to chit funds and multi-crore scams, with the maximum observed in West Bengal and Odisha.