CB warning on dubious mobilisation of funds from the public
View(s):The Central Bank (CB) on Friday issued a warning to the public to be wary of individuals and organisations mobilising funds from the public.
“It has been observed that certain individuals and entities mobilise funds from the public by issuing various instruments. Promissory Notes, Commercial Papers and Debentures are few of them. It should be mentioned that certain categories of institutions raise funds by issuing the above mentioned instruments in order to meet their financial obligations. Though these products may be attractive in terms of return, individuals should ensure the appropriateness of such funds for their purposes,” the CB said in a statement.
It added that the banking regulator has observed that some entities mobilise funds from the public without giving adequate information regarding the true nature of such instruments and without following the accepted procedure for such activities. In this background, the CB has informed the public to be vigilant on the legal status of various financial products, the standard procedure for issuing such instruments and the risks involved in investing in such products.
“Further, the CB wishes to inform the public that the issuing procedure, terms and conditions relating to investing of money, withdrawal procedures and other features relating to investments in Promissory Notes, Commercial Papers and Debentures are different from depositing money in banks and finance companies. Accordingly, the investments in such instruments do not fall into the category of deposits in the normal circumstances. The deposits placed in licensed banks and licensed finance companies are subject to the protection of the Deposit Insurance and Liquidity Support Scheme operated by the CB. Investments in Promissory Notes, Commercial Papers and Debentures are not eligible under the Deposits Insurance Scheme. Therefore, in the event of any default by the issuer of such instruments, investors have no protection under the Deposit Insurance Scheme,” it said.
“In view of the above, the public is informed to exercise extreme care and be vigilant when investing their hard earned savings in instruments offered by various institutions. If anybody wishes to invest in such instruments, he/she is advised to carefully read the offer documents, contents in the agreements, terms and conditions applicable for return, premature redemption and term to maturity etc,” the CB said.
| CB warning against moneylenders | |
| The Central Bank (CB) on Friday issued a public warning against moneylenders saying it has received many complaints pertaining to these individuals or entities, and adding that a new law is being drafted to deal with moneylenders. “As per the existing legal framework, moneylenders do not come under a licensing and regulatory regime, unless they accept deposits. Therefore, the CB with the Ministry of Finance has taken action to draft a law for licensing, regulation and supervision of moneylenders and protection of customers. The said law is currently in the drafting process and is expected to be enacted in the near future,” it said. The CB statement said: “The CB has observed that advertisements and other forms of communications are made through various channels, including print, electronic and digital media, offering loans. Complaints have been made on certain irregularities in this regard. There are some allegations regarding scams, while some are complaining of high interest rates, harassment to customers and misusing of confidential customer information by such moneylenders. A moneylender could be described as a person who carries on or advertises or announces himself or holds himself out in any way as a lender of money on interest, with or without security. “The public is advised to exercise due diligence and care to avoid becoming victims of the scams operating in the guise of moneylending businesses. The public should obtain full information before entering into an agreement for a financial transaction. Further, it is advised to rely on regulated entities when entering in to financial transactions.” |