Table of Contents
1.The FIR and the Expanding Investigation
2. What the Law Says About Unregulated Deposits
3. Jar’s Legal Challenge in the High Court
4. The Business Behind the App
5. Wider Implications for India’s Fintech Sector
A fast-growing savings app that popularized daily investments in digital gold is now at the center of a regulatory storm.
The Criminal Investigation Department (CID) in Karnataka is investigating the Bengaluru-based fintech startup Jar under the Banning of Unregulated Deposit Schemes Act, 2019, following a First Information Report registered last month. Authorities are examining whether the company’s operations fall afoul of provisions that prohibit unregulated deposit-taking activities.
The FIR, initially filed by the Koramangala Police on January 16, was later transferred to the CID’s Deposit Fraud Investigation division. Officials are probing alleged violations under Sections 21(1) and 21(2) of the Act, which address fraudulent deposit schemes and defaults in repayment.
At issue is whether Jar operated without a license from India’s financial regulators — the Securities and Exchange Board of India (SEBI) or the Reserve Bank of India (RBI). CID officials have indicated that the investigation remains ongoing.
Jar, for its part, has moved to quash the FIR in the Karnataka High Court. Justice M. Nagaprasanna, after hearing arguments from both the petitioners and the police department on February 21, has reserved the matter for judgment. The company has also sought a stay on all proceedings arising from the FIR.
In a statement responding to media inquiries, a spokesperson for Jar said the company was “fully cooperating with the authorities” and had provided all requested information. Given that the matter is sub judice, the spokesperson added, it would be inappropriate to comment on specific allegations but expressed confidence that “the facts will emerge through the due process of law.”
Founded in 2021, Jar positioned itself as a digital gold savings platform designed to simplify micro-investing. Through a recurring payments feature linked to India’s Unified Payments Interface (UPI), users could invest small amounts daily. Those funds were used to purchase digital gold through partner systems, allowing customers to accumulate fractional holdings that could later be liquidated.
The model resonated with young savers and first-time investors. According to data sourced from Tracxn, the company raised approximately $63 million in equity funding from prominent investors, including Tiger Global Management, Arkam Ventures and Panthera Capital. In the financial year 2025, Jar reported revenue of Rs 2,450 crore and a net loss of Rs 50 crore.
The case unfolds against a backdrop of heightened regulatory vigilance in India’s fintech ecosystem. The Banning of Unregulated Deposit Schemes Act, enacted in 2019, was designed to curb fraudulent investment schemes that had cost small investors billions. Its broad language has occasionally drawn scrutiny from startups operating in gray areas between technology platforms and financial intermediaries.
For fintech companies, the distinction between facilitating investments and accepting deposits can carry significant legal consequences. Regulators have increasingly emphasized compliance, licensing clarity and consumer protection as digital financial products proliferate.
Whether Jar’s operations constitute an unregulated deposit scheme under the Act will now hinge on judicial interpretation. The Karnataka High Court’s forthcoming decision may clarify not only the company’s immediate fate but also the contours of regulatory boundaries for digital savings platforms.
For a sector built on trust and technological efficiency, the investigation represents more than a legal hurdle. It is a reminder that in India’s rapidly evolving financial landscape, innovation and regulation continue to advance in uneasy tandem.
EDITED BY – MOHD ARSAYAN
(STUDENT OF MANAGEMENT STUDIES AND INTERN AT HOSTELBEE)
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