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Expecting the government's efforts to expand financial inclusion to help curb ponzi menace, Sebi chief U K Sinha has said that agents, lured by 20-30% commissions, have been pushing illicit schemes among gullible investors in the absence of good savings products.
Sinha, who is steering Sebi efforts to tackle the ponzi menace, said that in regions like West Bengal and North East -- where penetration of banking services is low -- have seen a larger number of people getting trapped in illegal money pooling schemes that promise high returns.
He hoped that new programmes like the Jan Dhan scheme, launched by Prime Minister Narendra Modi to expand financial inclusion and banking coverage across the country, will help encourage people to put their money in formal financial system.
"There have been certain deficiencies in financial services space and that have been a key reason for mushrooming of illegal schemes... Jan Dhan Yojana will plug this loophole," Sinha told PTI in an interview here.
"If you look at the larger picture, part of the reason is that there is deficiency in provision for financial services in different parts of the country. Perhaps if that deficiency was not there people would not have invested (in ponzi schemes)," the Sebi Chairman said.
The capital market watchdog has now got more powers, such as carrying out search and seizure operations, to clamp down on fraudsters and illegal money pooling activities.
According to Sinha, traditionally in West Bengal, the national savings or postal savings used to be very high compared to many other parts of the country. Besides, the density of bank branches in West Bengal and North East is low.
"When there was a deregulation of interest rate, then the whole post deposit scheme did not remain as attractive as they were in the past. So people started getting attracted to all this (money pooling schemes).
"Most of the agents of CIS are people who were agents of small savings (schemes) or mutual funds... They thought they could get as high as 20-30% commissions, so they started pushing for these (ponzi) schemes," Sebi chief said.
With the enactment of a new Securities Laws Amendments Act, the government has enhanced powers of Sebi to take action against illegal money-pooling activities involving Rs 100 crore or more. The Act also provides for setting up of a special court to expedite the cases filed by Sebi.
The capital market watchdog has already taken action in recent years against entities having collectively raised well above Rs 1 lakh crore through various schemes and its crackdown is expected to rise considerably after grant of new powers.
