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Monday, July 16, 2018

Raghuram Rajan: Need to catch fly-by-night operators when illegal fund raising is in progress

The RBI Governor said some operators do not fall under the ambit of any regulator, are very small or operate from far-flung areas, making punitive action difficult.

By: ENS Economic Bureau | Mumbai | Published: August 5, 2016 1:45:15 am
raghuram rajan, reserve bank, rbi, state level coordination committee,  protection of interest of depositors act, s raman,  sebi, illgeal deposits, illegal deposits with firms, latest news, india news Raghuram Rajan. (Source: PTI)

Reserve Bank Governor Raghuram Rajan on Thursday said illegal raising of funds should be stopped while the crime “is in progress” and the “fly-by-night” operators run away with the money.

“We have to do this before the fly-by-night operator runs away with the money. We have to stop the crime in progress,” he said while launching ‘Sachet’ (, a website from which the members of public would be able to obtain information regarding entities that are allowed to accept deposits, lodge complaints and also share information regarding illegal acceptance of deposits by unscrupulous entities.

The RBI Governor said some operators do not fall under the ambit of any regulator, are very small or operate from far-flung areas, making punitive action difficult. When the regulator do manage to move-in, they “morph” into such an entity, which is outside the purview of any regulator, he said, underscoring the need for coordination between financial regulators and law enforcement agencies.

Rajan said there have been favourable changes in laws like the Protection of Interest of Depositors Act, and there are forums like State Level Coordination Committee (SLCC), which help in fight against unauthorised deposit raising. These give the authorities the power to intervene before the money has actually been taken away and misused, he said, making a strong appeal to public not to fall prey to such tactics.

On the menace of phishing mails in the name of the RBI, he said, “I suggest all of us should ask, if they have got Rs 50 lakh to give me, why do they need me to send Rs 25,000 in the first place? Why can’t they just deduct the Rs 25,000 and send me the remainder?’ That question should be asked by anybody who gets such a solicitation.”

Explaining the features of the website, Deputy Governor SS Mundra said, members of the public can on the website check whether or not a particular entity seeking to accept public deposits is registered with any regulator and whether the entity is permitted to accept deposits.

“The website also incorporates regulations prescribed by all financial regulators that different entities have to follow. Further, members of public can file and track a complaint on this website if any entity has illegally accepted money from them and/or defaulted in repayment of deposits. They can also share information regarding any such entity on this portal,” he said.

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The website also has a section for closed user group for SLCCs on which they would be able to share market intelligence and other information relating to their activities, including agenda and minutes of their meetings, across the country on a real time basis. The website will act as a “force multiplier” and go a long way in making the functioning of SLCCs more effective and curbing the menace of unauthorised money raising activities, he said.

All States have State Level Coordination Committees (SLCCs) which comprise various regulators, Registrar of Companies (ROC) and concerned State Government departments, such as Home Department, Finance Department, Law Department and various police authorities. SLCCs were reconstituted in 2014 in each State to monitor unauthorised collection of deposits and they meet more frequently under the chairmanship of Chief Secretaries of the concerned States with participation of senior level officials of the States and the regulators.

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