In an effort to prevent recurrence of Saradha like ponzi scheme operators, various financial regulators and the state governments will share information with each other, and would work on ensuring that public savings flow into formal banking channels. This was decided at the conference of state secretaries and financial regulators held on Monday.
"SLCCs (state-level coordination committees) should focus on financial inclusion for flow of public savings to the formal channels and protection of deposits of public mopped up by unauthorised and unscrupulous entities", Reserve Bank of India governor Raghuram Rajan told state secretaries.
The 27th conference of the state finance secretaries held in Mumbai discussed the matter of ponzi schemes threadbare to protect gullible and poor savers from being lured by pyramid operators. State secretaries have agreed to develop a dedicated website for SLCC members for sharing the developments and best practices and information on dubious entities. They suggested strengthening of the Economic Offences Wing and Cyber Cells to curb the menace.
Sebi chairman UK Sinha suggested that states should enact depositors' investor protection act and strengthen the enforcement mechanism.
Rajan said the decline in financial savings would be a challenge to debt management when growth and private sector credit would pick up. The gross domestic saving rate as per Central Statistical Office's estimates declined to 30.1% in 2012-13 from 31.3% in 201112, mainly on account of a decline in the rate of household physical savings People were holding their assets more in cash currency, which in turn, led to contraction in bank deposits. The general election was a trigger behind it. So far in the current financial year, the currency in circulation has increased by Rs 46,000 crore to around Rs 13 lakh crore.
During the same period last year, the incremental growth was almost two and a half times lower to Rs 18,900 crore. However, going forward, funds are likely to flow back to the banking system making room for interest rate cuts.
Rajan has warned state governments about adverse consequences of loan waivers offered by states and the adverse impact on the financial health of banks whose capital needs have gone up due to enhanced provisioning requirements following deterioration in asset quality and others.
Source: http://economictimes.indiatimes.com/
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