Lok Sabha Question No. 2405 (UNSTARRED), answered on 2019-07-08
Subject: Financial Scams
Ministry: FINANCE
Asked by: Khagen Murmu, Sukanta Majumdar, Raja Amareshwara Naik

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA UNSTARRED QUESTION NO. 2405

ANSWERED ON MONDAY, JULY 8, 2019/ ASHADHA 17, 1941 (SAKA)

## FINANCIAL SCAMS

2405. SHRI KHAGEN MURMU: DR.SUKANTA MAJUMDAR: SHRI RAJA AMARESHWARA NAIK:

Will the Minister of FINANCE be pleased to state:

- (a) whether the incidents of financial scams, involved in luring customers to invest by promising them higher returns are on the rise in the country and if so, the details thererof during the last three years;
- (b) whether various chit fund and ponzy schemes scams have been reported in the country including West Bengal;
- (c) if  so,  the  details  thereof  including  the  investigations  done  and  the  action  taken thereon;
- (d) whether the Government has promulgated the Banning of Unregulated Deposit Schemes Ordinance, 2019 to deal with such scams and if so, the details thereof; and
- (e) the  other  steps  being  taken  by  the  Government  to  curb  financial  scams  in  the country

## Answer

THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI ANURAG SINGH THAKUR)

- (a) to (c): As per the information received from regulators and enforcement agencies, the following are the details:
-  The Reserve Bank of India (RBI) has informed that as on 31.03.2019, 1288 cases related to unauthorized deposit collection were discussed in State Level Coordination  Committee  (SLCC)  meetings.  Of  these,  155  cases  relate  to  West Bengal and were discussed in various meetings of SLCC in West Bengal.
-  The Sachet portal of RBI, which is the online platform for SLCCs that facilitates the public to lodge complaints of financial frauds, has received 5225 complaints (since the launch of the portal in August 2016) related to non-repayment of deposits and money collected for various kinds of Investment Schemes (1461 in 2016-17, 1683 in 2017-18, and 2081 in 2018-19).
-  The Securities and Exchange Board of India   (SEBI) has passed Orders against 75 entities for non-compliance of SEBI (Collective Investment Schemes) Regulations, 1999 during the last 4 years (34 in 2015-16, 11 in 2016-17, 19 in 2017-18 and 11 in 2018-19).  SEBI  has  also  passed  34  orders  related  to  issuance  of  equity  shares/ convertible securities to the public in violation of law during the last 4 years (5 in 2015-16,  3  in  2016-17,  16  in  2017-18,  8  in  2018-19  and  2  in  2019-20  till 31.05.2019).
-  The Directorate of Enforcement (ED) has informed that during the last three years, ED  has  initiated  investigation  in  27  cases  under  the  Prevention  of  Money Laundering Act, 2002 related to Chit Fund and Ponzi Schemes.
-  The Ministry of Corporate Affairs (MCA) has ordered investigation into the affairs of 109 companies allegedly involved in investment scams (such as Chit Fund scams/ MLM/ Ponzi Schemes) and has assigned them to the Serious Frauds Investigation Office (SFIO) during the last three years (47 in 2015-16, 27 in 2016-17, 34 in 201718 and 1 in 2018-19).
-  The Central Bureau of Investigation (CBI) has registered 166 cases relating to Chit Fund / Ponzi companies during the last 4 years (14 in 2015, 23 in 2016, 109 in 2017 and 20 in 2018 upto 30.11.2018).

(d) :  Yes,  Sir.  The  Banning  of  Unregulated  Deposit  Schemes  Ordinance,  2019  was promulgated  by  the  Hon'ble  President  on  21.02.2019  and  it  came  into  effect  on  the same  day.  The  Ordinance  contains  comprehensive  provisions  to  tackle  illicit  deposit taking activities in the country and to protect the interests of depositors. The Ordinance contains  a  substantive  banning  clause  which  bans  deposit  takers  from  promoting, operating,  issuing  advertisements  or  accepting  deposits  in  any  Unregulated  Deposit Scheme.  The  Ordinance  also  provides  for  severe  punishment  and  heavy  pecuniary fines to act as deterrent.

(e) : The following measures have been taken by the Government to curb unauthorized schemes and to prevent common people from losing their hard earned money:

-  28 States / Union Territories have passed Protection of Interest of Depositors (PID) Acts for taking action against entities collecting money from the public illegally.
-  SLCCs  have  been  set  up  in  all  States  and  UTs  with  participation  by  all  State Government  officials,  law  enforcement  agencies,  regulators,  etc.  SLCCs  were reconstituted in April 2014 with the Chief Secretary of the State as the Chair and the frequency of such meetings has been increased from twice a year to four times a year.
-  RBI has cautioned the public regarding Ponzi schemes under the head of Frequently Asked Questions (FAQs) on their website, and through advertisements on newspapers/ radio/ television. Further, through RBI's online portal  SACHET (https://sachet.rbi.org.in), the public is cautioned against fraudulent  schemes/ entities.
-  SEBI is empowered to regulate Collective Investment Schemes (CIS) under Section 11AA of the SEBI Act, 1992. With regard to irregularities in the securities market, SEBI is empowered to conduct investigation, take appropriate enforcement actions under the SEBI Act, 1992 and issue Orders.
-  ED has been mandated with the task of enforcing the provisions and investigating the  contravention  of  the  Foreign  Exchange  Management  Act,  1999  (FEMA),  the Prevention  of  Money  Laundering  Act,  2002  (PMLA),  and  the  Fugitive  Economic Offenders Act, 2018.
-  MCA conducts investor awareness programs to educate the general public to learn from websites of various Ministries the information published regarding the persons involved in the scheme, etc. before making any investment.