The Reserve Bank of India (RBI) has suggested that state governments crack down on unauthorised non-banking firms collecting deposits from people. It also asked people not to deposit any money in them.
"The state governments, under the prevailing laws, can take action against the unauthorised Non-Banking Financial Companies (NBFCs) collecting money from people," RBI assistant general manager (department of non-banking supervision) P.N. Murthi said at a seminar in Aizawl on Wednesday.
Murthi and another RBI assistant manager (department of non-banking supervision) Rama Narang gave a power point presentation at the seminar on 'An overview of the regulatory functions of RBI over NBFCs'.
The RBI officials said NBFCs not recognised by the RBI, the Insurance Regulatory Development Authority (IRDA) or the Securities and Exchange Board of India (SEBI) cannot do any monetary business or take deposit from people.
In his inaugural speech, Mizoram Chief Secretary Van Hela Pachuau said: "The northeastern state is a transit route for several illegal activities."
Regarding the functioning of illegal NBFCs in Mizoram, the chief secretary said: "The problem has been persisting since the early 1980s. Even though we have been victimised by these fake companies all the time, we have not learnt lessons. Due to our carelessness and gullibility people have lost huge money."
According to Pachuau, at least 21 NBFCs are operating in Mizoram, bordering Bangladesh and Myanmar.
"When these companies make attractive offers we do not care to verify the authenticity and terms and conditions. We are easy prey to them," the chief secretary added.
He also admitted that even though the government had certain rules and acts to take care of this, it has not really implemented them properly to stop these activities.
He asked the police, excise and other departments and agencies concerned to take more proactive steps and reorganise themselves, if necessary, to take action against the NBFCs.
The speakers at the daylong seminar also mentioned the need to educate and create awareness about the issue and urged the RBI to take action and undertake an awareness campaign as well.
Nationalised banks in Mizoram have suffered a lot due to the activities of NBFCs; this is a matter of grave concern, banking and civil administration officials said at the seminar and asked the police to act swiftly against the illegal companies.
Unauthorised NBFCs have mushroomed in the northeastern region in recent years. These organisations take deposits from people promising abnormally high rates of interest. After collecting the money, they close their operations and leave the area.