Sterner Bihar law to rein in ponzi firms
The Bihar government is all set to lend more teeth to the Bihar Protection of Interest of Depositors (In Financial Establishments) (Amendment) Act, 2013, to protect the interest of investors in chit fundsindia Updated: Mar 19, 2017 18:58 IST
The Bihar government is bringing in a fresh amendment to the Bihar Protection of Interest of Depositors (In Financial Establishments) (Amendment) Act, 2013, to rein in and facilitate closer monitoring of non-banking financial institutions and chit fund companies operating in the state.
The amendment to the existing law will be brought in during the ongoing budget session of the state legislature.
The new amendment will provide for more powers to the police to investigate and initiate action against unscrupulous firms collecting and misappropriating money from members of the public. The amendment bill will be moved in the state assembly on March 29.
The new amendment also purports to rein in those chit fund firms and para banking firms that are operating in the state without proper license and approval of the government bodies concerned, including the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI).
The amendment takes its cue from the Sarada chit fund scam in West Bengal in which a consortium of about 200 private companies collected about Rs 2,500 crore from 1.7 million investors before the scheme collapsed. It comes after several fly-by-night companies duped lakhs of investors in Bihar in a similar fashion.
“The new amendment will facilitate quicker investigation against such companies as working in a clandestine manner to dupe people of their hard earned money by promising them high returns ,” said a senior officer of the finance department.
The state government had first amended the original act in 2013, to incorporate a new clause wherein it was made it mandatory for any financial institution to provide details of its operations, location and license from RBI and SEBI to the competent authority, in most cases district magistrates.
At that time too, more powers were given to the police for carrying out investigations into such cases.
The changes were brought in to avoid the mushroom growth of Ponzi firms in the state and protect investors from falling into the trap of unscrupulous financial firms as it happened in West Bengal, where lakhs of investors were duped by big chit fund companies .