Reserve Bank of India (RBI) Deputy Governor S S Mundra stressed on the need for a stronger regulatory framework to deal with the menace of Ponzi schemes across the country. He agreed the system also needs to shoulder the blame for such fraudulent investment schemes.
“The banking system plays a very important role and it has to share a fair share of the blame as ultimately, whatever the shape and size of the scheme, ultimately, the money goes through the banking system,” said Mundra at the Multidisciplinary School of Economic Intelligence at National Academy of Customs, Excise and Narcotics.
He added 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 such schemes can be nipped in the initial days was also stressed.
“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 (CBI) had said around Rs 80,000 crore of public money was locked 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 there was 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 whereby 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.
