RBI Act was already having provision to bar acceptance of deposits by unincorporated Bodies

RBI Act was already having provision to bar acceptance of deposits by unincorporated Bodies


RBI Act was already having provision to bar acceptance of deposits by unincorporated Bodies

Everyone is now talking a about “The Banning of Banning of Unregulated Deposit Schemes Ordiance-2019” which places the bar on acceptance of deposits pursuant to unregulated deposits scheme.

The present ordinance is a new enactment specially drafted to protect the interest of the innocent citizens of the country.

However, people need to know that there is already a provision in the RBI Act-1934 in section 45- S which also places the same bar.

Section 45-S is a part of CHAPTER IIIA of the RBI Act-1949 titled as “COLLECTION AND FURNISHING OF CREDIT INFORMATION”

Chapter III C which includes the relevant Section 45 – S reads as under:



45R. Interpretation.

The words and expressions used in this Chapter and defined in Chapter IIIB shall have the meanings respectively assigned to them therein.]

2[45S. Deposits not to be accepted in certain cases.

(1) No person, being an individual or a firm or an unincorporated association of individuals shall, accept any deposit–

(i) If his or its business wholly or partly includes any of the activities specified in clause (c) of section 45-I; or

(ii) if his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner;

Provided that nothing contained in this sub-section shall apply to the receipt of money by an individual by way of loan from any of his relatives or to the receipt of money by a firm by way of loan from the relative or relatives of any of the partners.

(2) Where any person referred to in sub-section (1) holds any deposit on the 1st day of April, 1997 which is not in accordance with sub-section (1), such deposit shall be repaid by that person immediately after such deposit becomes due for repayment or within three years from the date of such commencement, whichever is earlier;

Provided that if the Bank is satisfied on an application made by any person to the Bank that such person is unable to repay a part of the deposits for reasons beyond his control or such repayment shall cause extreme hardship to him, it may, by an order in writing, extend such period by a period not exceeding one year subject to such conditions as may be specified in the order.

(3) On and from the 1st day of April, 1997, no person referred to in subsection (1) shall issue or cause to be issued any advertisement in any form for soliciting deposit.

Explanation.– For the purposes of this section, a person shall be deemed to be a relative of another if, and only if,–

 (i) they are members of a Hindu undivided family; or

 (ii) they are husband and wife; or

(iii) the one is related to the other in the manner indicated in the List of Relatives below:– 

List of relatives–

  1. Father, 2. Mother (including step-mother), 3. Son (including stepson), 4. Son’s wife, 5. Daughter (including step-daughter), 6. Father’s father, 7. Father’s mother, 8. Mother’s mother, 9. Mother’s father, 10. Son’s son, 11. Son’s son’s wife, 12. Son’s daughter, 13. Son’s daughter’s husband, 14. Daughter’s husband, 15. Daughter’s son, 16. Daughter’s son’s wife, 17. Daughter’s daughter, 18. Daughter’s daughter’s husband, 19. Brother (including stepbrother), 20. Brother’s wife, 21. Sister (including step-sister), 22. Sister’s husband.]

45T. Power to issue search warrants.

(1) Any court having jurisdiction to issue a search warrant under the Code of Criminal Procedure, 1973 may, on an application by an officer of the Bank or of the State Government authorised in this behalf stating his belief that certain documents relating to acceptance of deposits in contravention of the provisions of section 45S are secreted in any place within the local limits of the jurisdiction of such court, issue a warrant to search for such documents.

(2) A warrant issued under sub-section (1) shall be executed in the same manner and shall have the same effect as a search warrant issued under the Code of Criminal Procedure, 1973.]

 1 Ins. by Act 1 of 1984, s. 10  (w.e.f. 15-2-1984)

2 Subs. by Act 23 of 1997 s.9  (w.e.f. 1-4-1997)

Above provision makes refererence to section 45-I(c). The same is also repdocued for the benefit of the readers and for ease of convenience.

Referring section 45I(c)

Section 45I is a definition clause as under:

 45I. Definitions.

In this Chapter, unless the context otherwise requires,–

45(c) ‘‘financial institution’’ means any non-banking institution which carries on as its business or part of its business any of the following activities, namely:–

(i) the financing, whether by way of making loans or advances or otherwise, of any activity other than its own:

(ii) the acquisition of shares, stock, bonds, debentures or securities issued by a Government or local authority or other marketable securities of a like nature:

(iii) letting or delivering of any goods to a hirer under a hire-purchase agreement as defined in clause (c) of section 2 of the Hire-Purchase Act, 1972:

(iv) the carrying on of any class of insurance business;

(v) managing, conducting or supervising, as foreman, agent or in any other capacity, of chits or kuries as defined in any law which is for the time being in force in any State, or any business, which is similar thereto;

(vi) collecting, for any purpose or under any scheme or arrangement by whatever name called, monies in lumpsum or otherwise, by way of subscriptions or by sale of units, or other instruments or in any other manner and awarding prizes or gifts, whether in cash or kind, or disbursing monies in any other way, to persons from whom monies are

collected or to any other person, 1[but does not include any institution, which carries on as its principal business,–

(a) agricultural operations; or

(aa) industrial activity; or]

(b) the purchase or sale of any goods (other than securities) or the providing of any services; or

(c) the purchase, construction or sale of immovable property, so however, that no portion of the income of the institution is derived from the financing of purchases, constructions or sales of immovable property by other persons;]

2[Explanation.– For the purposes of this clause, ‘‘industrial activity’’ means any activity specified in sub-clauses (i) to (xviii) of clause (c) of section 2 of the Industrial Development Bank of India Act, 1964;]

1 Subs. by Act 51 of 1974, s.17, for cl. (c)

The present enactment in the form of “The Banning of Banning of Unregulated Deposit Schemes Ordiance-2019 is in addition to section 45-S in the RBI Act. With ordinance section 45-S has not been made inoperative.

In my view, the violation will result action under both the law.