Panel set up to plug regulatory gaps in shadow banking sector

Also raised concern about regulatory gaps in case of entities operating collective invt schemes like chit-funds

Raising concern on the regulatory and data availability gaps in respect of the shadow banking system in the country, the Reserve Bank of India (RBI) today said plugging the data gaps is necessary for a holistic assessment of the size of the non banking financial segment and of the systemic risks posed by the segment.

To address these issues, a Working Group with representation from all the financial sector regulators is attempting to “macro map” the shadow banking sector in the country, RBI said..

The banking regulator also raised concern about regulatory gaps in case of entities operating collective investment schemes like chit funds, multi-level-marketing schemes.

Recently multi level marketing firm Speak Asia Online allegedly duped thousands of investors and the case is under investigation from various authorities including Enforcement Directorate (ED) and cyber crime cells of police of various cities.          
In Financial Stability Report (FSR) released today, RBI cited few examples from current financial system in India which are out of regulatory purview of the central bank.

 

“Government sponsored NBFCs remain outside the regulatory and supervisory framework of NBFCs” however RBI in its recently published draft guidelines for the NBFCs had said all government companies that qualify as NBFCs under the revised principal business criteria will be required to comply with the regulatory framework applicable to NBFCs at the earliest," RBI said.

The report further says, “there is little regulatory oversight over the large quantum of funds handled by post offices, employees’ provident funds or government pension schemes;”
 
However analysts pointed out using shadow banking term for the government NBFCs, post offices and pension and provident schemes isn’t fair even if they don’t have regulatory oversight they have government oversight and those NBFCs are subjected to Comptroller and Auditor General (CAG) audit and post offices, pension and provident fund schemes are directly owned by the government.