In order to serve content on our website, we rely on advertising revenue which helps us to ensure that we continue to serve high quality unbiased journalism.
To know how to disable your Ad Blocker, please
Please refresh your page, once Ad Blocker is disabled
The Lok Sabha on Wednesday approved the Securities Laws (Amendment) Bill 2014 empowering capital market regulator Securities Exchange Board of India (Sebi) to crack down on ponzi schemes to prevent systematic financial swindle of gullible small depositors.
Replying to the debate on the Bill, finance minister Arun Jaitley said: "Where there is money there are bound to be some sharks... You would have stray cases and it deals with them when strong regulatory mechanism is required."
The finance minister said one of the ways to deal with the menace of ponzi scheme is to expand the reach of banking system to save gullible investors from such schemes.
A ponzi scheme is a system in which new members enrich the old ones resulting in a fragile financial pyramid that might suddenly collapse one day.
"The prime minister in the next few days is likely to announce that scheme (financial inclusion) and once banking expands in this country to almost cover as many people as possible, we intend reaching at least 2 more account holders in 75 million families.
"That is our object of financial inclusion and if we are able to reach such a large section of population, the need for people to be attracted such ponzi schemes itself will go down," the finance minister said.
The market regulator had been seeking appropriate powers to regulate "ponzi," multi-level marketing schemes and collective investment schemes (CIS) that are typically structured in a fragile financial pyramid that might suddenly collapse one day.
A collective investment scheme (CIS), the ones that West Bengal's Saradha group was carrying out, typically raise funds from the public to invest the money in a project and the returns are shared at a later stage.
While it was mandatory for all CIS schemes to register with Sebi, in practice many of these come under the radar only after the regulator receives complaints from investors after they had been duped by the promoters of such companies.
Jaitley further said that banking system, which "works on conventional and conservative wisdom" is still one of the most reliable form of investments and savings.