by Renuka Sane.Retail finance in India is once again in the news for reasons of fraud, this time in the form of the Saradha Group in West Bengal. There is a general sense that such schemes proliferate because of the failure of financial inclusion, and that better supervision by current regulators will bring us back on track. The problems of mis-selling however, are not confined to the unregulated chit-fund industry. For many years now, problems of consumer protection have been gathering prominence. While there is concern about...
Tuesday, 30 April 2013
Monday, 29 April 2013
There is a great deal of moral outrage about ponzi schemes. Parliament is being asked to "do something!". We have seen this movie in India before. Laws are enacted as a knee-jerk response to an event. Quick and dirty responses are poorly thought through, which perpetuates the cycle of underperformance in public administration [example: IRDA/SEBI ordinance, example: MFI bill; example: Lok Pal Bill;].Laws are the DNA of government, and the drafting of laws should be done with extreme care. The drafting of law should:Be rooted in adequate technical...
by Suyash Rai and Smriti ParsheeraThe first task in dealing with ponzi schemes is correctly defining the scope of financial regulation. Once a firm is classified as a financial service provider, the appropriate regulator must choose a regulatory strategy for it. Assuming SEBI had clear jurisdiction with Sahara or MMM, what would SEBI do?Safety and soundness regulation (also called micro-prudential regulation) is an expensive form of regulation, which includes requirements relating to maintenance of capital, investment restrictions, corporate governance,...
by Shubho Roy.What has happened?SEBI was investigating Saradha for more than 3 years before the deposit schemes of the company collapsed (See here). Saradha seems to have used two methods to delay the investigation: When SEBI asserted its authority to stop Saradha group from collecting money, Saradha challenged the jurisdiction of SEBI in district courts. It quickly got orders to prevent SEBI interfering in its businesses. These orders were eventually overturned by the High Court. When SEBI requested information from Saradha about their...
by Smriti Parsheera and Suyash Rai.Attack of the ponzi schemesThe Saradha Group has gained notoriety in recent weeks with outstanding public deposits reportedly exceeding Rs.200 billion. There was anger and panic. The state government has stepped in with partial redress.As we watch this saga unfold, there may be another crisis waiting to happen in the form of a pyramid scheme offered by `Mavrodi Mondial Moneybox (MMM)' that is taking rural India by storm. MMM claims to be a `social financial network' in which members voluntarily share money...
Friday, 26 April 2013
Wednesday, 24 April 2013
In any country, various arms of government like to indulge in taxation of their own choice, and in setting up little treasuries that they control. However, it is quite clear that there must be only one treasury, and only one authority that determines taxation, through only one Finance Act.In the Economic Times today, I have an article that applies this idea into analysing a recent proposal by DOT to impose an 8% tax on wireline broadband providers.You may find some of the associated materials useful:Consultation paper issued by DOT on this in December...
Sunday, 21 April 2013
David Montgomery, Sari Horwitz and Marc Fisher have a great story in the Washington Post about how the police tracked down the murderers in Boston. Also see Spencer Ackerman in Wired magazine. On a similar theme, look back at the attack at Times Square in New York.We in India fare dismally on this. Lacking competence in the police, we repeatedly engage in faulty tradeoffs in security, where police either infringe on the freedom of citizens or resort to brutality against innocent `suspects'. Every time the police quickly solve a case, I worry that...
Friday, 12 April 2013
by Apoorva Gupta.The recent announcement that dismantled the levy and monthly release mechanisms, in the sugar industry, will make the industry more efficient and competitive. But much remains to be done. This is a good time to look at the government interventions in this industry, the implications of recent decisions, and the way forward. Major government controlsWith an aim of offering farmers, firms, and consumers a fair deal, the government intervenes...
There is little experience in India with large complex projects of drafting law. The process adopted by FSLRC had many strengths. In the table below, I have pulled together the names of all 146 persons mentioned in the report. A diverse array of knowledge and perspective was brought into the project. In addition, the work took place over two years with a large dedicated workforce. In these respects, it represents an important contrast with the small closed groups, and small scale of resources, that have traditionally done drafting of law in India.NameDesignation...
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