Fraudulent practices by financial establishments in Punjab would now invite up to 10 years of imprisonment, with provisions for attachment of properties.

As per The Punjab Protection of Interests of Depositors’ (in Financial Establishments) Bill 2018, cleared by state cabinet, fraudulent practices by financial establishments will also be a non-bailable offence.

The Cabinet has approved a new legislation to this effect, in a bid to safeguard the interests of depositors and curb fraudulent practices by financial establishments.

The Bill has been brought in following several complaints of fraud received by the State Government, Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI), an official spokesperson said after the Cabinet meeting.

Under Section 6 of the legislation, if a finance company fails to return the deposits on due date or defrauds the public then the promoters, managers and employees would be liable for imprisonment up to 10 years and fine of Rs One lakh. The financial establishment will also be liable for a fine of Rs Two lakh which may extend to Rs One Crore.

Section 5 of the legislation provides that all financial establishments would be required to submit quarterly return of their business to the district magistrate or additional district magistrate. In case of default, the company would be liable to pay fine of Rs One lakh.

Section 3 authorises the government to attach the properties of the company and also properties of owners/directors and promoters of the company.

The move follows mushroom growth of financial establishments in Punjab, with many of them making unlawful gains by way of receiving money as deposits from the public, particularly of the middle class and the poorer sections of the society.

This is done by such companies by making impracticable or commercially unviable promises or by offering highly attractive rates of interest or rewards, with the intention of not fulfilling the obligation of refunding the deposits on maturity or with the intention of not rendering proper services assured, to the investors at the time of accepting the deposits.

The proposed Bill would go a long way in protecting the rights of innocent depositors, who were often duped by such fraudulent financial institutions on the pretext of supplementing their money manifold, the spokesperson said.