Besides, the Cabinet also decided to make changes in the Chit Funds Act in a bid to enable greater financial access of people to other financial products, a Finance Ministry release said here.
"In a major policy initiative to protect the savings of the investors, the Union Cabinet has given its approval to introduce the... Banning of Unregulated Deposit Schemes Bill, 2018, and the Chit Funds (Amendment) Bill, 2018," it said.
"The bill is aimed at tackling the menace of illicit deposit-taking activities in the country. Companies/institutions running such schemes exploit existing regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard-earned savings," the release added.
A new comprehensive law would completely prohibit unregulated deposit-taking and provide for deterrent punishment for promoting or operating such schemes, besides introducing other changes, the government said.
On the proposal to make changes in the Chit Funds Act, the statement said the government aimed to facilitate orderly growth of the sector and remove bottlenecks being faced by the industry.
The amendment will enable "greater financial access of people to other financial products", it said.
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