Saturday, June 15, 2013

Finance Ministry to consider regulating Finance and Investment Schemes

The following schemes are being considered for being appropriately regulated/ banned by Finance
Ministry

Prize chit funds

  • Each member subscribes to a certain sum of money by way of periodical installments over a period. Each subscriber, in his turn, as determined by various ways, is entitled to the prize amount
  • Banned by the Prize Chits and Money Circulation Schemes (Banning) Act, 1978
Money-circulation schemes


  • Promises to give commissions not only in the event of personal efforts of recruiting members for the scheme but also on the contingency relative to enrollment of new members
  • Banned by the Prize Chits and Money Circulation Schemes (Banning) Act, 1978
Ponzi scheme  

  • Pays returns to investors from its own money or that paid by subsequent investors, rather than from profit earned by the firm running the operation. The scheme usually lures new investors by offering fancy returns
Collective investment schemes

  • A way of investing alongside other investors to benefit from the advantages of working as part of a group
  • The Securities & Exchange Board of India approval needed to launch such scheme
Pyramid schemes

Offer payments to participants primarily to recruit other people for the scheme; there is no real investment or sale of products
    Multi-level marketing

    These schemes sell products directly; salesmen are compensated for their own sales as well as for those of people who join the company through them

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