Banks have to share blame for ponzi schemes: S S Mundra

Admin   |   08 June, 2015   |   898   |   3980

Reserve Bank of India deputy governor S S Mundra stressed on the need for a stronger regulatory framework to deal with the menace of ponzi scheme across the country.

He agreed that the banking system also needs to shoulder the blame for such fraudulent investment schemes.

“Banking system plays a very important role and they have to share a fair share of the blames as ultimately whatever may the shape and size of the scheme be, ultimately the money goes through the banking system,” said Mundra at the multi-disciplinary school of economic intelligence at National Academy of Customs, Excise and Narcotics.

He added that the new small and payments banks will help in furthering the case of financial inclusion which will reduce the number of people falling prey to such schemes. The increased reliance on business correspondents in reaching out to people has also helped in expanding the ambit of people who can bank through authorised channels.

The need for a stronger regulatory framework to ensure that such schemes can be nipped in the initial days was also stressed upon.

“One important thing we have seen in recent deliberations is that many ponzi schemes are falling under a regulatory vacuum, as there is no clarity on whose regulatory turf it falls in, and therefore remains a grey area,” said Mundra.

In April, Anil Sinha, Director, Central Bureau of Investigation had said that around Rs 80,000 crore of public money was locked up in only those ponzi scams that was being investigated by CBI.

Financial illiteracy, apart from greed was another important factor that has led people to invest in ponzi schemes. In order to correct this, the regulator has been reaching out to people via advertisements and workshops. He added that there was also a case for strengthening the state level coordination committee (SLCCs).

“There is a need to make the SLCCs more active and effective. The project is already underway where by a website within the overall website of RBI for the SLCCs members’ will be there. The idea is that it should be interactive so that anything that comes to someone’s notice can be reported on the site and then action can be taken,” added Mundra.