Minister for Finance and Law K.M. Mani informed the State Assembly on Tuesday that the State government was considering imposing restrictions on mobilisation of deposits by builders prior to launching apartment projects.
Replying to the debate on the Kerala Protection of Depositors Interests in Financial Institutions Bill, as reported by the Subject Committee, the Minister said that Central and State government financial corporations, cooperative societies, and banking institutions, as defined by the Banking Regulations Act, would be excluded from the purview of the Act. The definition of a financial institution would cover not only financial schemes, but also deposits mobilised by individuals, a group of individuals, a partnership company, and a company registered under the Companies Act, he said. The Bill seeks to protect the interests of depositors by empowering the government, through the designated competent authority, to recover the value of deposits through sale of movable and immoveable properties of the defaulting financial company, he said.
CPI(M) member V. Chenthamarakshan and CPI member Mullakkara Ratnakaran, in their dissenting notes attached to the Bill, said that chitty companies, private financial institutions, non-banking companies, money chains, builders, and those who promised huge interest rates through advertisements were not brought under the purview of the new legislation. The penalty for the accused had been limited to just Rs.1 lakh. The two leaders feared that some of the provisions in the Bill would provide loopholes to the accused who had been charged with criminal cases. The Bill also does not have provisions making registration mandatory for such organisations. The dissenters wanted provisions in the Bill that would expressly ban advertisements promising high interest rates.
The Minister said the apprehensions expressed by the members were misplaced because the Bill, once passed, would be able to successfully address the problems faced by depositors. Some of the members felt that there was lack of clarity in the definition of the competent authority, but the Minister did not accept the proposal.