RBI tells state governments to take action against chit funds

KOLKATA: Reserve Bank of India wants strict enforcement of state laws to prevent chit funds from duping depositors.

The banking regulator said it has written to all state governments to formulate action plans against these dubious multi level marketing companies, which lure depositors with high returns and raise money from them without central bank’s permission.

“RBI does not regulate them. We have written to state governments to check proliferation of these companies,” governor D Subbarao said Thursday in Kolkata.

The banking regulator has forced companies like Peerless and Sahara to phase out their deposit-taking business, hundreds of chit-funds across the country have flourished by flouting rules, raising concerns over safety of public money.

Depositors are being lured by chit funds with higher returns than what banks offer them. These companies are also flourishing in the rural belts where banking penetration is low.

RBI has offered state police departments and enforcement agencies training to nab such companies who are duping depositors.