HindustanTimes Sat,20 Sep 2014

Govt sounds alarm bells on illegal non banking firms

Sanjib Kr Baruah, Hindustan Times  New Delhi, March 17, 2013
First Published: 23:49 IST(17/3/2013) | Last Updated: 23:50 IST(17/3/2013)

With over 83% Non Banking Financial Companies (NBFC) operating in India being illegal, a top panel of economic intelligence agencies has expressed alarm on the havoc that these unauthorised NBFC can create among the innocent public through their duping ways.


The panel that met last month expressed considerable apprehension over the fact that of the estimated 30,000 NBFCs in the country, about 25,000 are not registered with the central controlling authority, the Reserve Bank of India (RBI). The RBI, which has to approve the NBFC status, has a list of just 5,000.

The consumer affairs ministry has already approached the RBI with the list of 30,000 NBFCs seeking that the RBI identify such companies that are functioning without authorisation and initiate action against them to prevent them from duping the innocent public.

Meanwhile, finance minister P Chidambaram has also directed RBI to inform all banks of these unregistered companies. The Centre has already intimated the CMs to issue directions to their respective law enforcement agencies to take strict action against such frauds.

Market regulator SEBI has detected cases of 669 companies duping investors of about R7,435 crore through illegal collective investment schemes.

The trouble has already been brewing for some time with ‘vanishing companies’ growing in numbers. Gujarat heads the list of states with 26 such companies ‘vanishing’ after raising funds. All together more than 200 such cases have been detected.

In the Ponzi or Multi Level Marketing (MLM) investments, the firms generally raise money from the general public and ask each investor to bring others into these schemes with promise of rich returns. But after some time, these operators disappear, leaving the investors in the lurch. West Bengal leads the list in MLM scams.

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