The Government of Karnataka on August 29, 2026, issued the Karnataka Protection of Interest of Depositors in Financial Establishments Rules, 2026.
The Rules prescribe detailed procedures for handling fraudulent deposit-taking cases, including investigation, provisional attachment, seizure/freezing and management of assets. Nodal Officers, District Magistrates and Competent Authorities are empowered to receive complaints, investigate financial establishments, examine records, issue summons, conduct searches and attach or freeze properties. Reports must cover complaints, financial activities, regulatory compliance, assets, income, tax records and audited financial information.
The Rules also establish procedures for search and seizure, appointment and functioning of Competent Authorities, forensic audits, tracing of money trails, management of securities and sale of attached properties. Assets may be sold through auction, e-auction, tenders or private treaty with approval of the Special Court, while proceeds are required to be deposited into the designated account.
A detailed claims and repayment mechanism is prescribed for depositors and secured creditors. The Competent Authority must assess liabilities and assets, invite claims through public notices, verify supporting documents and make approved payments through NEFT/RTGS after bank-account verification. Special procedures are provided for claims involving deceased, NRI, missing or untraceable depositors and their legal heirs/successors.
[Notification No. FD-CAM/52/2025(P-2)]
