RBI Could Have Taken Action Against Ponzi Companies: Enforcement Directorate

The Enforcement Directorate (ED) is probing why senior Reserve Bank of India (RBI) officials did not take any concrete action in Ponzi scams like Saradha. The ED is not convinced by the RBI’s contention that it did not have the power to act in these cases.

Section 58 B of the RBI states, "Whoever in any application, declaration, return, statement, information or particulars made, required or furnished by or under or for the purposes of any provisions of this Act, or any order, regulation or direction made or given there under or in any prospectus or advertisement issued for or in connection with the invitation by any person, of deposits of money from the public willfully makes a statement which is false in any material particular knowing it to be false or willfully omits to make a material statement shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine."

According to media reports, ED had questioned both RBI and Security and Exchange Board of India (SEBI) officials in these scams. SEBI had begun prosecution proceedings but RBI did not take any action, saying its role is merely regulatory in nature. ED had also sent a list of questions to the RBI on the issue, but did not receive a convincing reply.