The government is moving to ban multi-level
marketing (MLM companies through an amendment to The Prize Chits and
Money Circulation Schemes (Banning) Act, 1978. The proposal has been
mooted by the department of financial services and is likely to be fast
tracked considering the seriousness of the chit fund scam, an issue that
was discussed by the standing committee of finance on Friday.
CNBC-TV18’s Siddharth Zarabi reports.
The chit fund mess has a lot of details coming out
, but the first big scam of this kind was Speak Asia. When the
government and every agency concerned tried to figure out whether Speak
Asia was even regulated or entitled to operate in India, it discovered
that the Singapore-based company was out of reach of almost every Indian
agency and law.
Given what has happened with Saradha Group and others, the department of
financial services and the department of economic affairs (DEA) which
has concurred that this proposal finally moots a specific amendment
which will ban MLM companies from operating in India.
When will this be operationalised, the legal amendment will have to go
through the Parliamentary route and will be tabled for Cabinet approval
which will come up shortly. However, in some ways this is the biggest
regulatory loophole beyond what has been reported in the collective
investment scheme — a mess that has been dogging India for so many years
and is proposed to be closed.
With regards to chit fund mess, the parliament standing committee headed
by Yashwant Sinha on Friday, grilled the entire finance ministry brass
led by the finance secretary almost a day long hearing and the details
that are coming out.
Details that have been shared including, central board of direct taxes
(CBDT) findings that there is massive tax evasion in Calcutta based chit
funds and this is not a recent discovery. Two years were assessed by
the IT department in Calcutta, reports were sent to almost every agency
concerned in India, nothing happened, yet the Saradha scam broke.
In the Saradha scam, the IT department has confessed to the standing
committee that it has not been able to obtain the details as the West
Bengal police and other authorities have refused access. All this paints
a situation where the government is yet to come to grips with the chit
fund issue but the key news will be that it may be doomsday for
companies like Speak Asia very shortly.
Source : Times of India(http://economictimes.indiatimes.com), 17th may 2013
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