New Delhi: Taking steps to crackdown on ponzi schemes, the government on Tuesday said the RBI has advised banks to carry out quick reviews of accounts opened in the names such as market agencies and retail traders, especially those cases where large number of cheque books have been issued.
Minister of State for Finance Namo Narain Meena informed the Rajya Sabha that an ordinance has been promulgated to amend the Sebi Act that would provide more powers to act against illegal collective investment schemes.
"RBI has also advised banks to be careful in opening of accounts of the marketing/trading agency, etc, and ensure strict compliance with the Know Your Customer (KYC) and Anti Money Laundering (ALM) guidelines," he said in a written reply.
In cases where accounts have already been opened in the "names of the marketing agencies, retail traders, investment firms etc, the banks have been advised to undertake quick reviews of operations in such accounts particularly in cases where large number of cheque books have been requested or issued," the Minister said.
According to him, RBI has also been sensitising state governments that multi-level marketiing schemes fall under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978, and that they should take appropriate action whenever instances of MLM are reported.
Besides, amendments to the Sebi Act would ensure that the market regulator has the power to regulate any pooling of funds under an investment contract involving a corpus of Rs 100 crore or more, among others.
In a separate reply, Meena said the root cause of mushrooming chit funds companies could be found in the failure of the formal financial institutions catering to the needs of people for savings and thrift schemes by expanding their geographical coverage.
Also, there is a general lack of awareness amongst masses of the distinction between legal and permissible financial products and illegal and unsafe schemes.