Govt may bar NBFCs from running deposit schemes to protect small investors

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The government may ban Non-Banking Financial companies (NBFCs) from running deposit schemes which are like Ponzi schemes offering unrealistic returns to investors, as a part of its efforts to strengthen the financial sector.

The move, said experts, is aimed at protecting small investors who invest their hard-earned money into those schemes and often get cheated by such fraudulent companies and their promoters.

This comes on the backdrop of continuing terror of Ponzi schemes in India as recently it went bust in West Bengal, sinking the money of millions of investors, most of who were outside the banking system.

Government officials said that discouraging sales of such schemes, which target lower- and middle-income groups and invest mainly in real estate and plantation, is tough as these companies are outside the reach of regulator.

Policymakers are planning to form a central coordination agency to share market intelligence between the central and state governments for better regulation of NBFCs and such Ponzi schemes companies.

Read more about: nbfc
Story first published: Monday, June 17, 2013, 9:40 [IST]
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