Deputy Commissioners became the Competent Authority under the Protection of Interest of Depositors (PID) Act, 2011, after the rules for the same were notified on August this year. Despite that, they were restricted only to collecting data on financial institutions in their districts, but not for long.
In the 19th meeting of State level Coordination Committee, it was decided to amend the rules of the Act, enabling the Competent Authorities to take action against fraudulent financial companies, informed Regional Director (Bihar and Jharkhand) of Reserve Bank of India, Manoj Kumar Verma, who also chaired the meeting.
“We were assured that required amendments will be made in the Act to award more power to the DCs for identifying and penalising any bogus financial companies. The information thus collected by the DCs has to be brought on state level so that any swindlers can be identifying anywhere in the state,” Verma said.
The meeting primarily focused on non-banking financial companies (NBFC) and measures to check any frauds operating using such companies as a front. “The office of Registrar of Chits has been constituted under the Chit Funds Act, 1982. This position will be held by Additional Finance Commissioner of the state, with DCs appointed as Joint Registrars. Every new chit fund company will have to get the approval of the Registrar to start business in the state and they will also have the power to punish defaulters,” said Verma.
The Registrar of Cooperative Society has been also been asked to keep an eye on defunct cooperative societies so that owners of chit funds do not convert them into such societies after declining to pay back the depositors. Even new cooperative societies will now have to get the approval of Competent Authorities under the PID Act, which is DC, stated Verma.
Covering the legal aspects of economic fraud, it was suggested to request Jharkhand High Court to entrust an existing court of appropriate level to be entrusted with the powers of Designated Court where cases under PID Act can be taken up. A Standard Operating Procedure was also released for law enforcement agencies to educate them in the legal options to take in case of infringement of regulations under PID Act.
“Companies opting for online registration are not checked thoroughly, which often leads to loopholes in the security system against fraudulent NBFCs. To plug these gaps, details of all registered companies will be forwarded to the police department for physical verification. Although applicants will get their registration within the designated time frame, it will be cancelled if the submitted details are found false,” Verma said.