In a significant step to tackle emerging digital financial frauds, the Maharashtra legislature has passed amendments to the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (MPID Act), bringing cryptocurrencies and other virtual digital assets (VDAs) within the ambit of the state's depositor protection law.
The amendments are aimed at enabling authorities to attach, assess and liquidate digital assets involved in financial fraud, while also accelerating recovery of investors' money by limiting procedural delays in MPID cases.
The Bill, introduced by chief minister (CM) Devendra Fadnavis, seeks to modernise the nearly three-decade-old legislation in response to the growing use of cryptocurrencies, digital coins and blockchain-based assets in unauthorised deposit schemes, cyber-enabled investment scams and other financial frauds.
Crypto Assets Now Covered under MPID Act
One of the most significant changes is the expansion of the definition of 'deposit' to include virtual digital assets or VDA, as defined under Section 2(111) of the Income-tax Act, 2025.
The amendment brings cryptocurrencies, non-fungible tokens (NFTs) and similar blockchain-based digital assets within the legal framework of the MPID Act.
Until now, authorities could primarily attach tangible or conventional financial assets while investigating fraudulent financial establishments. As a result, victims of crypto-based investment scams often faced difficulties recovering their money because virtual assets were not explicitly covered by the law.
With the amendment, authorities will now be able to identify, attach, value and liquidate digital assets allegedly acquired through fraudulent schemes and use the proceeds to compensate affected depositors.
The government said the changes plug an important legal gap that fraudsters increasingly exploited by shifting assets into cryptocurrencies and other digital instruments.
Faster Recovery through Procedural Reforms
The amended law also introduces measures intended to expedite proceedings before designated MPID courts.
Under the revised provisions, designated courts can grant a maximum of two adjournments during proceedings. A third adjournment will be permitted only in exceptional circumstances after the court records written reasons, a provision modelled on the Bharatiya Nagarik Suraksha Sanhita, 2023.
The government believes the restriction will reduce prolonged litigation and enable quicker disposal of investor recovery cases.
Appeal Only after 50% Liability Deposit
Another key amendment seeks to discourage financial establishments from delaying repayments through prolonged legal challenges.
Under the revised law, no appeal against an order of a designated MPID court will be entertained unless the financial establishment deposits 50% of its aggregate liability with the competent authority.
The provision is intended to prevent appeals being used merely as a tactic to postpone recovery proceedings and to strengthen the prospects of timely compensation for affected investors.
District Financial Monitoring Units To Track Fraud
Replying to the discussion on the Bill in the legislative assembly, minister of state for home Yogesh Kadam announced that the government will establish dedicated financial monitoring units in every district.
The proposed units will monitor suspicious financial entities, identify fraudulent investment schemes promising unrealistic returns and facilitate early intervention to safeguard depositors.
Mr Kadam said awareness about cryptocurrencies and cybercrime remains limited among the public, making many investors vulnerable to digital fraud. The amendments, he said, are designed to strengthen legal safeguards, improve enforcement and ensure quicker recovery of depositors' money.
He also reiterated that authorities could recover victims' losses by assessing the market value of crypto assets rather than merely freezing them in every case.
Debate in the Assembly
The legislation received broad support during the assembly debate, although members raised several concerns regarding implementation.
Congress leader Vijay Wadettiwar called for stricter regulation of cooperative credit societies and urban cooperative banks, citing multiple financial scams involving depositors.
BJP MLA Sumit Wankhede sought the establishment of fast-track courts dedicated to financial fraud cases to accelerate justice for victims.
NCP (SP) leader Jayant Patil advocated the creation of additional special courts to handle the increasing number of financial fraud cases. He also questioned the provision requiring a 50% deposit before filing an appeal, arguing that investors who have already lost substantial savings could face practical difficulties if similar requirements are imposed on them in other proceedings.
Mr Patil further urged the government to intensify action against cybercrime networks and fake social media accounts used for financial fraud, impersonation and online deception.
Strengthening Investor Protection
According to the statement of objects and reasons accompanying the Bill, the amendments are intended to strengthen depositor protection by addressing new forms of financial fraud involving virtual digital assets while reducing procedural delays that often hamper recovery proceedings.
The key benefits of the amendments include:
• Cryptocurrencies and other virtual digital assets can now be attached and liquidated in MPID proceedings involving financial fraud.
• Authorities will be able to determine the market value of seized digital assets and utilise the proceeds to compensate affected investors.
• Recovery proceedings are expected to conclude faster through strict limits on adjournments.
• Financial establishments will face greater difficulty in delaying repayments through appeals, as they must first deposit 50% of their aggregate liability.
The amendments position Maharashtra among the first states to explicitly incorporate virtual digital assets into a depositor protection framework, reflecting the government's effort to adapt existing financial fraud laws to the rapidly evolving digital economy and the increasing use of cryptocurrencies in investment-related scams.
