Banning of Unregulated Deposit Schemes Act, 2019

Sections 37, 38, 39 and 40 of the BUDS Act, 2019

Sections 37 to 40 of the Banning of Unregulated Deposit Schemes Act, 2019 deal with the power of the Central Government and State or Union territory Governments to make rules, the legislative laying procedure for those rules, and the Central Government's power to amend the First Schedule relating to Regulated Deposit Schemes.

Updated: 14 September 2026

Current rule-making context: The Central Government exercised its power under Section 37 to make the Banning of Unregulated Deposit Schemes Rules, 2020. Those Rules were notified on 12 February 2020 and came into force on publication in the Official Gazette.
Contents

Section 37 - Power of Central Government to make rules

(1) The Central Government may, by notification, make rules for carrying out the provisions of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:-

(a) the information and other particulars to be taken into consideration before issuing an order, and the manner of attachment, under sub-section (3) of section 7;

(b) the information to be shared under sub-section (2) of section 9;

(c) the form and manner in which and the time within which the intimation shall be given under sub-section (1) of section 10;

(d) the particulars contained in the application to be filed by the Competent Authority before the Designated Court under sub-section (1) of section 14;

(e) the procedure to be adopted by the Designated Court before issuing an order under sub-section (3) of section 15;

(f) rules under sub-section (1) of section 31;

(g) the manner of publication of advertisement under section 33; and

(h) any other matter which is required to be, or may be, prescribed.

Explanation: Section 37 is the Central Government's delegated rule-making provision. It authorises detailed procedural rules needed to implement the Act, including rules concerning provisional attachment, information sharing, deposit-taker intimations, applications before Designated Courts and publication requirements. The Banning of Unregulated Deposit Schemes Rules, 2020 were made under this section.

Section 38 - Power of State Government, etc., to make rules

(1) The State Government or Union territory Government, as the case may be, in consultation with the Central Government, by notification, make rules for carrying out the provisions of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:-

(a) ceiling for self-help groups under clause (j) of sub-section (4) of section 2;

(b) purpose and ceiling under clause (k) of sub-section (4) of section 2;

(c) the manner of provisional attachment of property by the Competent Authority under sub-section (3) of section 7;

(d) other matters under clause (f) of sub-section (4) of section 7;

(e) the rules relating to impounding and custody of records under sub-section (8) of section 7; and

(f) any other matter which is required to be, or may be, prescribed.

Explanation: Section 38 permits State Governments and Union territory Governments, in consultation with the Central Government, to frame implementation rules on specified matters within their administrative sphere. These include ceilings and purposes relevant to exclusions under Section 2 and procedures concerning property attachment and custody of records under Section 7.

Section 39 - Laying of rules

(1) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session, or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule, or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

(2) Every rule made by a State Government or the Union territory Government, as the case may be, shall be laid, as soon as may be after it is made, before each House of the State Legislature or the Union territory Legislature, as the case may be, where it consists of two Houses, or where such Legislature consists of one House, before that House.

Explanation: Section 39 provides legislative oversight of delegated legislation. Central rules must be placed before both Houses of Parliament for the prescribed period. State and Union territory rules must similarly be placed before the relevant legislature.

Section 40 - Power to amend First Schedule

(1) The Central Government may, having regard to the objects of this Act, and if it considers necessary or expedient so to do, by notification, add to, or as the case may be, omit from the First Schedule, any scheme or arrangement, and on such addition, or omission, such scheme or arrangement shall become, or cease to be, a Regulated Deposit Scheme, as the case may be.

(2) A copy of every notification issued under this section shall, as soon as may be after it has been issued, be laid before each House of Parliament.

Explanation: The First Schedule identifies schemes and arrangements treated as Regulated Deposit Schemes under the Act. Section 40 allows the Central Government to add or remove a scheme or arrangement by notification, subject to the statutory requirement that the notification be laid before both Houses of Parliament.

Key terms and related provisions

Appropriate Government

Section 2(1) identifies the Government responsible for specified matters under the Act. Depending on the territory concerned, this may be the Central Government, a State Government or the Government of the relevant Union territory.

Competent Authority

Under Section 2(3), the Competent Authority means an authority appointed by the appropriate Government under Section 7. Section 7 deals with appointment and powers of the Competent Authority, including provisional attachment in appropriate cases.

Designated Court

A Designated Court is constituted under Section 8. Sections 14 and 15 contain provisions relating to applications concerning attachment and orders of the Designated Court.

Regulated Deposit Scheme

Section 2(14) links the expression "Regulated Deposit Scheme" to schemes specified under the First Schedule. Section 40 is therefore important because it supplies the statutory mechanism for adding a scheme or arrangement to, or omitting one from, that Schedule by Central Government notification.

Related provisions on this website

For context, see Sections 1 and 2, Sections 7 and 8, Sections 12, 13 and 14, Sections 15, 16 and 17, and Sections 33 to 36.

Official legal sources

The authoritative statutory text should be checked on India Code - Banning of Unregulated Deposit Schemes Act, 2019. The Central rules are available from the Department of Financial Services - Banning of Unregulated Deposit Schemes Rules, 2020.

This page is intended as a statutory reference and explanatory guide. In case of any difference, later amendment, notification or judicial interpretation, the official Gazette and other authoritative legal sources prevail.