Unregulated deposit schemes, and the collector at your door

Writing about daily deposits usually treats an unregistered collector as a risk to weigh. Since 2019 there has been a law aimed squarely at that situation. This guide sets out what the Banning of Unregulated Deposit Schemes Act, 2019 says, read from its text on India Code, how it meets a daily collection round, and what it leaves open.

What the Act bans

Parliament passed the Bill in July 2019: the Lok Sabha on 24 July and the Rajya Sabha on 29 July, as PRS Legislative Research records. It became Act No. 21 of 2019, and section 1(3) makes it effective from 21 February 2019, the date of the Ordinance it replaced.

Section 3 bans "Unregulated Deposit Schemes". No deposit taker may promote or operate one, advertise for it, or accept deposits under it. Two definitions do the work:

• A deposit (s.2(4)) is money received "by way of an advance or loan or in any other form" with a promise to return it, in cash, in kind or as a service, "with or without any benefit". The definition then lists amounts it does not include, such as loans from banks.
• An Unregulated Deposit Scheme (s.2(17)) is one under which deposits are taken "by way of business" and which is not a Regulated Deposit Scheme listed in the Act's First Schedule.

The First Schedule names nine regulators and the schemes each one covers: SEBI, the Reserve Bank, IRDAI, state and union territory governments, the National Housing Bank, PFRDA, the Employees' Provident Fund Organisation, the Central Registrar of Multi-State Co-operative Societies, and the Ministry of Corporate Affairs. A daily collection round run by way of business by anyone outside that Schedule is the case the ban is built for.

The penalties are custodial:

The Act also provides for a Competent Authority, an officer "not below the rank of Secretary" to the appropriate government (s.7). It may provisionally attach a deposit taker's property, and a Designated Court confirms the attachment so the property can be sold to repay depositors (sections 14 and 15).

How this meets a collection round

Three situations look identical at the door. A registered chit is a fourth thing again, neither a deposit nor an unregulated scheme: it runs under its own statute, with sanction, registration and a Registrar of Chits. We set the two side by side in pigmy deposit or chit fund.

A co-operative bank with a banking licence. Licensed by the Reserve Bank, and outside the Act's definition of a deposit taker: section 2(6) excludes a co-operative bank, a regional rural bank and a banking company. If it appears on the DICGC insured-bank register, deposit insurance of up to ₹5,00,000 per depositor applies.

A registered co-operative society. The Act counts a co-operative society as a deposit taker (s.2(6)(viii)), but the First Schedule lists any scheme "made or offered by a co-operative society registered" under a state co-operative law as a Regulated Deposit Scheme, with the State Government as regulator. For a multi-state society, the Schedule's entry covers deposits "from voting members", with the Central Registrar as regulator. Either way the society is still not a bank. It does not appear on the DICGC register, because the DICGC states that primary co-operative societies are not insured by it.

Neither. No licence, no registration, daily cash collected and a passbook issued. This is the case the Act bans.

The middle case is the one that catches people. Finding that a society is properly registered feels like a clean answer and is only half of one: the money is still outside deposit insurance if the society fails. Our guide to the co-operative credit structure sets out why the banking licence, and nothing else, is what moves deposit insurance.

What to do

Ask for the licence or the registration certificate, and the number on it. Verify the number with the authority that issued it rather than accepting a photocopy at the door. A passbook, a printed receipt, a uniform and a route that has run for years are all consistent with an entity that was never registered.

If you cannot get a straight answer, stop paying before you do anything else. The cases in our guide on collection fraud show how much easier it is to stop handing over money than to recover it. Our bank-or-society checklist turns this into questions to ask.

What we could not establish

• Where a particular arrangement falls. Whether a given scheme is inside the First Schedule, and so regulated, depends on how its operator is registered and what it actually does. That is for the text and a lawyer, not for this page.
• What the multi-state entry means for depositors who are not voting members. We quote the Schedule and do not interpret it.
• The Rules. The Central Government made Rules in 2020, and several states and union territories have made their own; we have not read them.
• How actively the Act is enforced against small deposit collection, as opposed to large investment frauds.

Corrected on 9 October 2026. Earlier versions of this page relied on a summary of the Bill and said the enacted Act had not been read. Read from the Act, the maximum fine for a repeat offence is ₹50 crore, not ₹5 crore as this page said, and the soliciting offence was missing. The question of co-operative societies, previously left open, is now answered from the Act's own Schedule.

Nothing here is legal advice. It describes the Act at the level of what it bans and what it provides, so that a depositor knows the question exists.