Gold Silver Reports — India Needs Many More Banks — The Reserve Bank of India on Friday said it has prepared a list of 194 doubtful money collecting companies operating in West Bengal and is examining whether they are doing business within the norms.
“West Bengal has been particularly vulnerable for gullible depositors. We are collecting details of these companies and will share the information with the state level coordination committee,“ said Rekha Warrior, RBI regional director in Kolkata .
According to the central bank, all these entities are essentially engaged in collecting money from public in various guises -some through potato flexi bonds, some through money circulating schemes, and some as multi-layer marketing companies.
The proliferation of these entities, barely within three years of Saradha scam, where thousands of depositors lost their money to illegal money circulating schemes, has raised concerns.
These entities typically offer very high interest rates to lure unaware depositors.
RBI does not allow registered non-banking finance companies (NBFCs) to offer more than 12.5% a year on deposits, or to accept deposits for less than 12 months or more than 60 months.
RBI is also worried over the mushrooming of entities that offer to arrange unsecured loans easily. “Some entities are placing advertisements in the newspapers… They claim to provide hassle-free loans with minimum paper work and also falsely claim that they registered with RBI,“ Warrior said. “We would like to sensitise the media about these ads,“ she said.
Another RBI official said, “We got to know from our market intelligence team that most of these companies are fraudulent and they charge processing fees and legal fees from the person applying for the loan, but the loan amo unt is never credited.“
State-level coordination committees act as a bridge between various regulators and take follow-up action in bringing to book entities indulged in unauthorised businesses involving funds mobilisation from public.
India Needs Many More Banks
The RBI’s move makes sense and its concerns are valid.People who are aware of markets would find any scheme that offers very high returns in one year suspicious and shun them.Those who are not aware of current bank interest rates might easily fall for such a scheme. But savers are driven to parallel markets for loans because India is grossly under-banked. More banks and fostering financial inclusion will reduce the grip of the informal lending system on society. Rightly, the RBI is working towards this goal. Awareness and financial literacy should also improve. — Neal Bhai Reports