No Ban on funds Received for Business or Personal Purposes: Govt
Government has clarified that The ordinance issued on Thursday to ban unregulated deposit schemes does not stop any entity from seeking funds for its business or an individual raising a quick loan from relatives to tide over a crisis.
Banning of Unregulated Deposit Schemes Ordinance, 2019 does not ban small and medium enterprises (SMEs) from receiving loans in the course of, or for the purpose of, business, the government has clarified.
The government said individuals borrowing or taking loans or money from relatives orfriends for marriage or medical emergency or business needs or any other personal reasons have nothing to fear from the law. Such transactions are not unregulated deposit schemes as defined in section 2(17). Further, any amount received by an individual by way of a loan from his relatives has been entirely exempted under section 2(4)(f).
Small businesses, proprietorship, partnerships, LLPs and SMEs that take unsecured loans from unrelated parties and enterprises are also exempt under Section 2(4)(I) of the law.
This exemption covers advance payment for hire or supply of goods and covers genuine business needs and trade advances among others so that those who depend on small short-term credit or deposits for various needs do not face any problems. In the case of charitable institutions, they accept donations and not deposits. Section 2(4) of the Act defines deposit and does not include donations.
Also, there is no ban on any individual taking a quick loan to tide over a crisis from relatives as prescribed under Section 2(4)(f).
There were apprehensions that the real estate sector may be hit as deposit can only be accepted for a designated transaction and can be adjusted against future sale consideration.
The government has clarified that such transactions are exempted under Section 2(4)(g) and (l).