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India plans legislation to close a regulatory loophole that has made it possible for fraudsters to dupe millions of savers, as Prime Minister Narendra Modi strives to bring the rural poor into the mainstream banking system.
Unscrupulous operators have bilked savers of billions of dollars by running pyramid schemes or promoting questionable investments in everything from tree plantations to farming emus, a flightless bird.
The most notorious has been Sahara, whose founder Subrata Roy was jailed in 2014 after failing to comply with a Supreme Court order to repay money raised under deposit plans later ruled illegal. The court has asked Sahara to return $5.4 billion to investors in those banned plans.
"Our aim is to take steps so that there are no more scams like Sahara in future," said Nishikant Dubey, a member of parliament's standing committee on finance from Modi's ruling Bharatiya Janata Party (BJP).
Tougher regulation would back up a drive by Modi to ensure that India's poor have access to regulated banking services. Under the Modi-backed People's Wealth Scheme, 218 million new accounts have been opened.
These are being linked to a national identity card scheme so that account holders can receive welfare benefits directly, to buy cooking gas or for work under a rural jobs scheme, reducing systemic fraud.
Lawyer Rakesh Nangia said the reform would create a stronger framework less prone to manipulation, and positive knock-on effects for investment and growth by channelling savings into the formal economy.
"This is important for Prime Minister Modi's financial inclusion plan," said Nangia, a managing partner at Nangia & Co, a Delhi-based law firm. "It would help the economy if the money was put in the mainstream banking system."
Modi govt to crack down on savings scams with thrust on banking for all - Firstpost
Unscrupulous operators have bilked savers of billions of dollars by running pyramid schemes or promoting questionable investments in everything from tree plantations to farming emus, a flightless bird.
The most notorious has been Sahara, whose founder Subrata Roy was jailed in 2014 after failing to comply with a Supreme Court order to repay money raised under deposit plans later ruled illegal. The court has asked Sahara to return $5.4 billion to investors in those banned plans.
"Our aim is to take steps so that there are no more scams like Sahara in future," said Nishikant Dubey, a member of parliament's standing committee on finance from Modi's ruling Bharatiya Janata Party (BJP).
Tougher regulation would back up a drive by Modi to ensure that India's poor have access to regulated banking services. Under the Modi-backed People's Wealth Scheme, 218 million new accounts have been opened.
These are being linked to a national identity card scheme so that account holders can receive welfare benefits directly, to buy cooking gas or for work under a rural jobs scheme, reducing systemic fraud.
Lawyer Rakesh Nangia said the reform would create a stronger framework less prone to manipulation, and positive knock-on effects for investment and growth by channelling savings into the formal economy.
"This is important for Prime Minister Modi's financial inclusion plan," said Nangia, a managing partner at Nangia & Co, a Delhi-based law firm. "It would help the economy if the money was put in the mainstream banking system."
Modi govt to crack down on savings scams with thrust on banking for all - Firstpost
