Amid outcry over Ponzi schemes causing huge losses to common people, Finance Minister P Chidambaram today said there are regulatory gaps and efforts are being made to frame a new law to oversee financial sector.
"The present arrangements have a number of gap areas, where no regulators are unambiguously in-charge, such as issue of regulatory oversight over diverse Ponzi schemes that we have discovered recently. These are cleverly designed to be out of the purview of regulatory agencies," he said.
The Minister was speaking at a seminar on the 'Indian Financial Code' (IFC) which was framed by Financial Sector Legislative Reforms Commission (FSLRC) with a view to update the laws and regulations dealing with the sector. The seminar was organised by Institute of Company Secretaries of India.
The present financial architecture, the Minister said, "has evolved over the years with a sequence of piecemeal measures and piecemeal legislations responding to immediate pressures from time to time. It is not specifically comprehensively designed to meet some key objectives".
The multiplicity of regulators create gaps, ambiguity and regulatory overlap due to lack of role clarity, he said, adding "this creates inefficiencies in addressing critical emerging issues in an increasing dynamic, complex and interconnected financial world".
On the suggestion of FSLRC to enact IFC as an omnibus legislation to regulate financial sector, the Minister said: "I am not sure how much this law will go through in the same fashion when it finally goes to Parliament ... (but it) will be a major milestone in Indian financial sector reforms."
The recent collapse of chit-fund company Saradha in West Bengal, in which people have lost thousands of crores, has underlined the need for tightening regulatory mechanism to deal with collective investment and Ponzi schemes.
