Unintended Consequences

The government's war against Ponzi Schemes is going to take a toll on businesses, especially small traders like partnerships, and individual firms.

A newly introduced bill -- the Banning of Unregulated Deposits Scheme Bill -- has barred business owners from taking loans from anyone other than banks, finance companies, and relatives.

That's not all; advance funds taken from clients against future supplies will have to be returned within 15 days in case of delivery failure. And these will be treated as a deposit if this isn't done.

The proposed law would pose problems for small businesses that often take loans from other businesses or friends, as they can't always access finance through formal banking channels.

Though businesses registered as companies, can still raise deposits as per the Companies Act, it is the partnership firms and individual businesses that would be hit worst, as they aren't allowed to raise any form of deposits from the public.