Financial literacy and investor awareness campaigns need to be initiated to caution depositors from investing in schemes floated by shady companies, according to senior bank officials.
In the wake of the crumbling of the the multi-crore Saradha scam, banks have highlighted the need for reaching out to people in rural and semi-urban areas in order to caution them against the risks involved in investing in such schemes.
According to Pratip Chaudhuri, Chairman, State Bank of India, financial market regulators such as the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) should launch awareness campaigns.
Higher risks
“Campaigns on the lines of Jago Grahak Jago should be launched asking depositors to check if the money invested in such schemes are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC),” Chaudhuri told newspersons on the sidelines of a banking summit organised by the Indian Chamber of Commerce here, on Saturday. Bank deposits up to Rs 1 lakh are insured by DICGC.
“Banks should be allowed to display a board announcing that deposits in the bank are insured by DICGC,” he said. The SBI chief also called for mass media campaigns to inform investors that higher returns on deposits were also associated with higher risks. Many people were parking money in such schemes after being lured by the promise of high returns or to purchase land or a house against the deposited amount.
“It is our responsibility to inform people; even after that if somebody wants to park his funds in such schemes, then it is entirely his call,” he added.
Nearly 80-90 per cent of people investing in such schemes would be holding bank accounts, he said, ruling out the possibility of unavailability of financial services as the reason why many invest in such schemes.
D. Sarkar, Chairman and Managing Director, Union Bank of India, talked about the need for creating forums at various levels to spread awareness.
“Forums at panchayat and village level need to be created to make people aware as to how such high returns (25-30 per cent) are possible when bank deposits are fetching (just) 8.5-9 per cent,” he said.