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Wanted: rules to rein in chit funds

In order to regulate non-banking financial companies and curb the activities of fraudulent ones, a state-level coordination committee has decided to hold quarterly reviews instead of half-yearly meetings.

M.K. Verma, regional director (Bihar and Jharkhand), Reserve Bank of India (RBI), revealed that the committee, which liases with the state government, RBI and other regulators such as Sebi, took this decision at a meeting in Ranchi on Thursday.

Speaking to media persons at the RBI office, Verma, who is also coordinator of the committee, rued that although Jharkhand had enacted Protection of Interest of Depositors Act, it was yet to frame rules.

Therefore, the committee decided to approach the state government to expedite framing of rules. It also decided to ask the state government to first, create a post of registrar of chit funds and then appoint a competent person for better functioning of the system.

“There is a need for designating a competent authority from the government’s side to tackle NBFC-related issues and sharing information with committee members,” he said.

Verma said there were 16 registered NBFCs operating in Jharkhand and not a single one had been authorised to accept deposits from the public.

He advised prospective depositors to check the RBI website for names of NBFCs that were registered and authorised to accept deposits from the public.

“It is advisable that people stay away from NBFCs that offered more than 12.5 per cent interest per annum and those that sought deposits for terms less than a year or more than 5 years,” he said.

Verma added that besides issuing circulars from time to time, RBI has also been cautioning people about fraudulent NBFCs through radio and newspaper advertisements.

“But there is still a need for making people aware about these companies,” he said.