“In the light of their (unincorporated non-bank entities) useful economic function, especially in India where financial inclusion is national priority, there is a need for a different approach to regulation of such non bank entities, while pursuing the objective of consumer protection alongside financial stability,” RBI said.
The central bank’s comments assume significance in the context of recent chit fund scams in the country. Recently, the Kolkata-based Saradha group went bust, leaving many investors high and dry. The Sahara group had its own share of problems with the Securities and Exchange Board of India, which ordered it to refund deposits worth Rs 24,000 crore to depositors and investors. The Sebi order was upheld by the Supreme Court.
“The reach of the banking sector to efficiently cater to all segments of the population in far-flung areas is limited and to some extent, entities in the non-banking sector have been filling this gap,” RBI said. B N Srikrishna, chairman, Financial Sector Legislative Reforms Commission, had highlighted the need for a unified regulator, among others, to plug the regulatory gaps.