The Telegraph
Monday , February 10 , 2014
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Sebi lens on gold schemes

New Delhi, Feb. 9 (PTI): Sebi, continuing with its crackdown on fraudulent money-pooling activities, has come across a large number of cases where investors are being lured into various gold-linked bond schemes.

However, a lack of clarity on regulations for most such schemes is making it difficult for Sebi to act against their operators, prompting it to seek help from other regulators and government departments, including the Reserve Bank of India.

Sebi may have to refer most of the gold-linked money pooling cases to the RBI, which is entrusted with the regulation of gold deposit schemes offered by banks and registered non-banking finance companies (NBFCs), a senior official said.

However, the problems are more acute for gold bond schemes by entities who are neither banks nor NBFCs, and, therefore, not registered with the RBI, he added.

A number of jewellers and other entities involved in the bullion business have launched various schemes allowing customers to pay instalments and take delivery of gold or get applicable returns at a later date.

While many schemes appear to be pure sale-purchase activities with the money being paid linked to the actual delivery of gold or jewellery worth the equivalent amount, there are numerous cases involving the issue of certain bonds making them securities market transactions.

These schemes ask the investor to contribute instalments of as low as Rs 100-1,000 per month, while they are promised returns linked to gold price appreciation after the expiry of one year or more.

The total amount of money pooled by such schemes could not be quantified as they are widely dispersed across the country and funds collected by many such operators are not reported to any single agency.