Concerned over the ponzi schemes and chit fund scams, Reserve Bank of India (RBI) governor D Subbarao said there is a need to review the regulatory oversight of this sector keeping in view the mandatory and relative comparative advantages of the financial sector regulators.
Subbarao said, the central bank will increase surveillance on such entities dealing with ponzi and chit funds schemes, adding that the recent scams have occurred in unregulated and illegal entities and need to tighten regulation to make regulation more effective. We also need to pay attention outside the regulated sector, he added.
By adding further, the governor said that the in view of RBI, eventually we must move towards a financial system where collection of deposits is restricted to banks which we regulate. Collection of deposits outside the commercial banking system must be minimized and eventually eliminated. Most of the frauds occurred in the non-banking sector through unlawful and fraudulent schemes.
Though, the RBI oversees around 12,000-odd non-banking finance companies (NBFCs) which are registered with it and has been consciously trying to reduce the number of such entities allowed to take deposits from the public, he added. The RBI has not given a single license of deposit taking NBFCs in the last 15 years.
