Govt. regulations for encashment, not enforcement

Publication:

Indo Asian News Service

Date Of Publication:

July 26, 2013

Chennai, July 26 (IANS) Legislative support, not regulation is needed for chit fund business that provides necessary funds for nearly 60 percent of the people who contribute to the country’s GDP without any institutional fund support was the near majority view of speakers at a conference here Friday.

Governmental regulations are not for enforcement but for “encashment” by officials as the regulations cannot be enforced, they said.

“Nearly 60 percent of the people do not have access to institutional credit. But they contribute around 60 percent to the GDP. The weakness in the current system is that vast majority of the people do not have access to institutional funds,” said R.Thyagarajan, co-founder, chairman of the Shriram group.

He was speaking at the conference Financial Sector Conclave-Chennai: Emerging Paradigms in South India, organised by Federation of Indian Chambers of Commerce and Industry (FICCI).

According to Thyagarajan, the chit fund industry is too small and difficult to regulate and it is better for the government to leave it.

“The number of registered chit fund companies failing is very small. Those finance companies that have failed are not chit fund companies,” he added.

According to Thyagarajan, the size of registered chit fund industry in the country will be around Rs.10,000 crore which does not merit governmental oversight at a huge cost.

“The government regulations are not for enforcement but for encashment,” he said making the audience have a good laugh.

Stressing that the chit fund business in the country is over-regulated, T.S.Sivaramakrishnan, general secretary, All India Association of Chit Funds said the companies have capital adequacy norms and do not accept public deposits.

“Chit fund business has survived for several decades and it needs legislative support and not legislative control,” he contended.

According to Sailaja Kiron, managing director, Margadarsi Chit Funds Pvt Ltd, the industry also caters to upper class people like the software professionals and others in addition to the lower class.

She said it is the only industry that services several lakh of subscribers month-on-month unlike any other industry in the financial services segment.

In Tamil Nadu, there are 2,226 chit fund companies running 51,145 chit groups. The state government earns around Rs.8 crore as revenue from this sector, said K.V.Srinivasan, additional registrar of chits.

According to him the government has received several complaints about chit fund companies forcing their clients to park their funds with group insurance companies or do that themselves without the subscribers consent.

“We are investigating the complaints and action will be taken,” Srinivasan told IANS on the sidelines of the meet.

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Better Surveillance must to tackle ponzi menance: RBI

Publication:

The Hindu

Date Of Publication:

July 7, 2013

The Companies Bill 2012 is likely to be passed in the coming monsoon session of Parliament, said Corporate Affairs Minister Sachin Pilot, as there is a broad political consensus on the legislation that aims at plugging loopholes in the system for a better corporate governance and business environment.

“This bill has been well thought out by all the stakeholders on board. There is no question of negotiating the terms of the bill”, said Mr. Pilot.

India’s first Companies Act was made way back in 1919 in colonial times. After independence, a new Companies Act came into force in 1956. Since then the act has been amended 25 times. The new Companies Bill 2012 was passed by the Lok Sabha after 11 years of deliberation and two rounds of approval of the standing committee were taken.

The Minister also said the Companies Bill has defined the word ‘fraud’ categorically, which had so far not been defined in the Companies Act.

“There are around 1.2 million companies registered in India. We are looking at lesser regulations, more compliance, strict enforcement and action and freedom of the entrepreneurs”, he added.

Regarding setting up of the much-awaited National Company Law Tribunal (NCLT), he said the NCLT will be set up. “In the new structure the NCLT will be able to take many decisions regarding the companies, arbitration and winding up.”

Mr. Pilot said the new bill even mandated that for certain class of companies there should be one woman director on the board.

“I am hopeful when the monsoon session starts it will see the light of the day.”

Mr. Pilot also said his ministry is planning to unleash a mass education programme across the country in various regional languages through the mass media to enlighten the people on financial investment.

“Within four to six weeks we can see this campaign happening. Its job is to give right information; not cautionary information, but what is good, what is bad, what is legal or illegal through SMS, internet, radio, social media and local media”, he said. “There has to be a culture of good investment.”

In the recent multi-crore Saradha Group Chit Fund scam in West Bengal hundreds of people have lost their jobs and thousands were duped of their savings.

Referring to the chit fund scandals in the country, the Minister said these usually happen to people who have least information and least resources. “All these chit funds and similar businesses have to be registered with the Registrar of Chit Funds in the state governments. The Serious Fraud Investigation Office (SFIO) is investigating all the 54 companies against which complaints have been received by my ministry.”

SFIO is a multi-disciplinary organisation that investigates serious financial frauds.

He said the SEBI, RBI and the finance ministry are also working on this. “The idea is not to act after the fraud has happened. I have been asking my ministry to detect frauds before it happens. These companies need to be registered, monitored and regulated by various agencies including state governments.”

Mr. Pilot also said his ministry is planning to unleash a mass education programme across the country in various regional languages through the mass media to enlighten the people on financial investment.

On his recent U.S. visit, he said it was a visit to understand best corporate practices over there. “India is a $1.5 trillion economy. Now Indian companies are working in foreign countries, foreign companies are working in India; what impact it has in the home countries and what are the sorts of the experiences they have because people who do corporate frauds, find new ways of devising to circumvent the law; what are those technologies? It was to understand those.”

Regarding the probe by the Justice Mudgal Committee that looked into WalMart’s lobbying activities to enter the Indian market, Pilot said, “We have received the report that Justice Mudgal has given us and we are now working on things we need to do, according to what the report has suggested. In the monsoon session, I will be presenting the report along with the actions which will be taken.”

Mr. Pilot remarked that there is a need to define the word lobbying legally.

“Today there is a lot of ambiguity and I think we must clear what is legal or not legal. Advocacy is happening today also; people are giving inputs for policy making, some people come and talk against a policy or for a policy; this advocacy should happen in full public view and in a transparent manner. But asking for a policy or tweaking a policy, if any, if those actions are out of the ambit of Indian law, then we must say it is illegal. Today, there is no clarity on that.”

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Unregistered chit funds, deposit raising to be considered fraud

Publication:

DNA Mumbai

Date Of Publication:

Tuesday, Aug 13, 2013

Unregistered chit funds, multi-level marketing companies or those raising deposits without registering themselves as collective investment schemes (CIS) would be considered as fraudulent and unfair trade practice.

The Securities Exchange Board of India, in its board meeting on Monday, approved the proposal to declare illegal mobilization of funds without obtaining a certificate under the SEBI (Collective Investment Schemes) Regulations, 1999 as a fraudulent and unfair trade practice (FUTP).

“It has been decided to amend the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. This amendment has been made to impose deterrent adjudication penalties on unregistered CIS entities mobilizing money,” said the regulator in a press release.

SEBI in last few years has gone all out against companies which have been illegally raising funds under various investment schemes. The regulator has recently passed orders against Rose Valley Real Estate & Construction, MPS Greenery Developers, Osian’s Connoisseurs of Art Pvt Ltd, Saradha Realty, etc.

The regulator has also decided to expand the regulatory framework of Sebi FUTP regulations to include front-running activity — which involves trading ahead on confidential information before some big institution places the order.

The amendment was much needed as the current regulations only covered action against front running by intermediary institutions and did not specify action against individuals indulging in front running.

The regulator also accepted the recommendations of independent consultant Oliver Wyman for increasing the market participation by mobilizing household savings into capital market assets, increasing organizational efficiency and oversight of listed companies, among others.

Executive Development program by IIM,Bangalore

Date Of Publication:

27-10-13

‘Executive Development program’ by Indian Institute of Management, Bangalore.

Dear all,

As desired by many of our members,the long awaited *One Day*  *Executive Development Program*  for our members has now been fixed for the Saturday the 9th of November 2013 at Bangalore, under the aegis of IIM Bangalore . Appended below is the venue of the program.

Fortune Park JP Celestial
No.5/43, Race Course Road
Bengaluru – 560 009
Tel: 91-80-3988 4433
Fax : 91-80-41476060
E-mail : jpcelestial@fortunehotels.in
Website : www.fortunehotels.in

Prof R.Vaidyanathan and Prof D.Shakarshan Basu (Both from IIM B) have already confirmed their
participation. On their invitation, Prof Mudit Kapoor of ISB has given his consent too. The rest of the
speakers and the subject will be confirmed in a day or two.

As the IIM faculty has suggested us to restrict the program to a maximum of about 50, in case if we
would like to have a one-to one priming; we will be compelled to entertain the registration strictly
on a ‘First come -First -serve” basis.

Though registration form is enclosed for your use, those who would ike to invest in this unique
program may inform the undersigned or Mr.Chitrarasu, our Organising Secretary, immediately over
the phone or e-mail, and confirm the availability, to avoid any possible disappointment.

Please do inform your friends, who are not accessing their mail frequently.

Sivaramakrishnan

09810024853

IIM Bangalore.pdf

Kerala State Financial Enterprise launches ‘Educare’ chit scheme

Publication:

Times News Netwrork

Date Of Publication:

December 11, 2013

Kerala State Financial Enterprises launches Educare chit scheme
TNN Dec 11, 2013, 06.28AM ISTTHIRUVANANTHAPURAM: The Kerala State Financial Enterprises has launched a new chit scheme aimed at school students that will help them find monetary backing for their higher education. The ‘Educare’ scheme aimed at students of classes five to 10, was launched here by finance minister K M Mani on Tuesday. The scheme was announced in the state budget of 2011.”The launch of the scheme was delayed because we had to wait for clearance from the Reserve Bank of India. Now that the clearance has been obtained, we are moving ahead with the scheme that will also hopefully help develop the habit of saving money among the students,” KSFE chairman P T Jose said.The scheme will be initially launched in seven schools selected from as many KSFE regional centers across the state. “By the next academic year, we hope to spread the novel initiative to more schools, and subsequently will be launched in all the schools in the state,” he said. The scheme will provide a handsome sum to students once they complete 12th standard and the money can be used to meet his/her higher education expenses.The chit scheme will be open only for the students from five to 10, and it will be operational till the students complete 12th standard. “This means that a 10th standard student who joins the scheme will make 36 installments of payment in the scheme by the time he completes 12th standard,” he said. The minimum monthly installment will be Rs 1,000. The scheme has been designed in such a way that the parents will be registered in the scheme on behalf of their wards.”This is because the Chit Fund Act does not allow students to be enrolled in such schemes. The parents will pay along with the savings of the students towards the scheme that will be collected by the Parent Teacher Association of the school, instead of our collection agents,” he said. The agents’ commission will instead be given to the PTA, that will be a good sum for the activities of the PTA, he added.”Also, the amount of whoever wins the monthly chit draw will be accepted as a deposit in the KSFE. This deposit will be given interest at the rate of 10.25%, an extra 0.25% compared to other deposits,” said Jose.THE TIMES OF INDIA

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