InvestorQ : How Banning of Unregulated Deposit Scheme Ordinance will help finance sector?
Akansha Shivdasani made post

How Banning of Unregulated Deposit Scheme Ordinance will help finance sector?

Answer
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Archita Jajjoo answered.
1 year ago


In order to protect the interests of depositors dealing with deposit-taking non-banking financial companies (NBFCs), the Banning of Unregulated Deposit Scheme Ordinance, 2019 (BUDs Ordinance) was announced. This ordinance only helps small businesses and individuals from unregulated deposit schemes.

It should be noted that, the ordinance does not stop any entity from seeking funds for its business or an individual to borrow loan from relatives to overcome a crisis. This move is to stop ponzi schemes to which small individuals fall into.

While enforcing the ban, this ordinance also amends the Reserve Bank of India Act, 1934, and Multi-State Cooperative Society Act, 2002, to explicitly state that “... a multistate cooperative society shall not be entitled to receive deposits from persons other than voting members”.

Although this is a laudable change, it will affect students and small traders that rely on charitable trusts as this ordinance is a major hurdle.