Fighting the Ponzi fire
Apropos of the column ?Tightening regulatory noose around Ponzi schemes?(FE, September 12), the situation will not change much unless the banks reach out to people in villages and small towns. According to one report, barely 40,000 villages out of 6 lakh in India have access to banking. At present, banks are mandated to invest R22 for every R100 mobilised as deposit. Besides all such funds as Employee Provident Fund land up in government bonds. A Ponzi scheme is essentially an investment fraud wherein the operator promises high financial returns or dividends that are not available through traditional investments. Instead of investing victims’ funds, the operator pays ?dividends? to initial investors, using the principal amounts ?invested? by subsequent investors. One reason why these Ponzi schemes proliferate is because of political patronage. It is debatable whether SEBI has the wherewithal to trace and check such schemes. Non-banking regulators would be a better safeguard for unwary investors.
MM Gurbaxani, Bangalore
