MINISTRY OF STATE IN THE MINISTRY OF FINANCE (BALASAHEB VIKHE PATIL)
(a), (b) & (c) : The Securities and Exchange Board of
India (SEBI) regulates Collective Investment Schemes
(CISs) through which investments are sought for agro,
plantation etc. related instruments. A special audit
of top 53 CIS entities was ordered in January, 1998.
Another two entities were audited pursuant to court
orders. Further, inspection of another 12 entities was
conducted by SEBI. The findings of audit report
revealed large scale diversion of funds to activities
unrelated to the schemes; a large portion of the money
raised has been spent towards the cost of mobilisation
of funds etc. Under the SEBI (Collective Investment
Schemes) Regulations, 1999 which were notified in
October, 1999, no existing CIS entity can launch any
new scheme or raise money from investors even under
existing schemes, unless a certificate of registration
is granted to it by SEBI.
SEBI has sent individual letters to all CIS
entities which did not file applications for
registration with SEBI, advising them to wind up their
schemes and repay their investors. Notices were also
issued to those CIS bodies which failed to do so, to
show cause why action should not be initiated against
them.
SEBI has recommended initiation of liquidation
proceedings against 605 CIS entities.
(d) A comprehensive regulatory framework has been put
in place which is aimed at protecting the interests of
depositors and ensuring that non-banking financial
companies (NBFCs) function on sound and healthy lines.
The regulatory framework includes, inter-alia,
compulsory registration, maintenance of liquid assets,
transfer of at least 20% of net profits to reserve
fund and empowering RBI to issue directions to NBFCs.
RBI takes various actions against errant NBFCs for
various defaults and contravention of provisions of the
RBI Act and directions issued thereunder. Government
has recently introduced a Bill in the Lok Sabha which
is expected to provide better safeguards to the
depositors of NBFCs.
