A Parliamentary panel has suggested that the Finance Ministry set up a co-ordination body to monitor public deposits.
The body should consist of representatives of the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), the Ministry of Corporate Affairs and State Governments.
This view emerged on Friday in a meeting of the Standing Committee on Finance to discuss the scam involving money pooling schemes, especially the Saradha scam in West Bengal.
RBI Governor D. Subbarao and his deputy Anand Sinha made a presentation on various regulatory aspects. SEBI chief U.K. Sinha is slated to submit his views on May 31.
After the meeting, Chairman of the Committee and senior BJP leader Yashwant Sinha said any regulatory action on the basis of recommendations given by Financial Sector Legislative Reforms Commission would take time.
“That is why, we will write to the Finance Ministry to set up a co-ordination mechanism in the interim,” Sinha told Business Line .
The Commission has recommended bringing all the deposit schemes under RBI regulation. At present, non-banking finance companies are regulated by RBI, while chit funds are regulated by State Governments. Nidhi funds fall under the Ministry of Corporate Affairs’ domain, and the Collective Investment Scheme is governed by SEBI regulations.
The problem, therefore, is that fraudsters can always find ways to avoid all regulations. “Basically, the issue here is not just the regulatory gap, but also regulatory overlap, and both things are happening,” Sinha said.
In fact, last week, Sinha had suggested that an ordinance be promulgated to ban chit fund companies from taking deposits from common people without registering themselves with the RBI as non-banking financial companies.
The committee, last week, also pressed for a blanket ban on investment schemes promising unreasonable returns and demanded a single regulator to oversee their functioning or scrapping them altogether, sources said.
A suggestion was also made to repeal the 1982 Act regulating chit fund business in the country through an ordinance.