Govt working with RBI to tackle chit fund menace: Pilot

The menace of illegal chit fund companies is not limited to West Bengal and the government is working with the Reserve Bank of India (RBI) to deal with the problem, Corporate Affairs Minister Sachin Pilot on Monday said.

He also said once the Serious Fraud Investigations Office (SFIO) gets the statutory recognition, after the Companies Bill is passed, most probably in this session of Parliament, it would be able to proactively take up cases such as this.

"The government is aware of the magnitude of the problem which is a problem not just of West Bengal, but also of other states and has initiated action in consultation with RBI to draft suitable measures to protect small investors from such multi-level marketing agencies which are taking advantage of the loopholes in law to misuse public money," Pilot said.

The minister was speaking at a conference organised by the MCC Chamber of Commerce and Industry here.

He said there is a need for better coordination among intelligence agencies to prevent frauds as small investors are the ones that suffer the most.

"There has been a series of corporate frauds in the country, but it is only after the fraud that agencies like SFIO, police and income tax come into the fire fighting mode. By that time, irrespective of what is being taken, small investors are the losers," he said.

The government is trying to evolve a system through the use of suitable technology and by examining finances of the companies to detect frauds before they happen, he said.

He further said the government has no plans to collect the money which companies have been asked to earmark for corporate social responsibility initiatives.

"Government would only interfere in cases where spending on corporate social responsibility (CSR) is due, but not taken up and not clarified for non-compliance," Pilot explained.

In the new Companies Bill, companies have been asked to earmark two per cent of their three years' average profit for CSR activities - a provision that stirred quite a debate across stakeholders.