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Finance Minister Arun Jaitley on Wednesday allayed fears that Ponzi scheme operators will split schemes into small funds to avoid being caught by the new law being proposed to empower the Securities and Exchange Board of India (Sebi) to regulate those collecting at least Rs 100 crore.
Jaitley also expressed the hope that the new financial inclusion programme of the Narendra Modi government will provide avenues to investors to avoid these schemes.
Various members in the Lok Sabha had raised doubts that while the Securities Laws (Amendment) Bill talks of bringing schemes collecting at least Rs 100 crore under Sebi's net, clever funds could split these schemes into smaller ones of less than Rs 100 crore each and escape the law.
In his reply, Jaitley said the new bill has taken care of these possibilities.
He said the revised bill has a section 11 (AA) which uses the words 'scheme or arrangement' and brought them under the Sebi ambit if they collect Rs 100 crore or more. The word 'arrangement' is wide enough to catch hold of the schemes, if divided into smaller ones, Jaitley said.
Later, the House passed the revised Bill. The original Bill was tabled by the previous United Progressive Alliance (UPA) government. In the absence of any law to cover all Ponzi schemes, an ordinance was promulgated thrice to bring them under the purview of Sebi, after some of them such as Saradha went bust.
The finance minister said: "Where there is money, there are bound to be some sharks. You would have stray cases and to deal with them strong regulatory mechanism is required." He 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.
The government, he said, is working on the financial inclusion scheme, which will be announced by Prime Minister Narendra Modi in the next few days. Although he did not say when, it is widely expected that the Prime Minister might announce the scheme in his Independent Day speech.
The scheme aims to expand the reach of banks to at least two more account holders in 75 million families. Currently, 58.7 per cent of the population has the banking facilities.
"If we are able to reach such a large section of the population, the need for people to get attracted by such ponzi schemes will go down in the system," Jaitley said.
He said the banking system "works on conventional and conservative wisdom" and is still one of the most reliable forms of investments and savings.
The Bill aims to empower Sebi to crack down on fraudulent investment schemes, seek information, and call data records.
Under the new Bill, the market regulator would require permission from a designated court in Mumbai for carrying out search-and-seizure operations related to investigations.
While Sebi has been given abundant powers, a check-and-balance has been introduced so that these powers are not misused, the finance minister said.
