Laws and Financial fraud

Financial Fraud cannot be avoided by having stringent laws and punishment. But, they can be minimised or eliminated gradually,if the existing laws are implemented, Regulation and supervision are made effective and Financial Inclusion and Financial Literacy are made a reality and people have access to some well regulated system which can take care of the Financial needs of the people.Chits are in fact an accepted way of investment by people and chits as such are not bad provided they are carried out not by cheats. Ponzi Schemes are unethical and worst form of derivative business without having a grip either on the circulation of money or the number of persons forming part of the scheme. Since Chit funds are very popular and have all safety principles if conducted as per the rules and regulations and with proper supervision by authorities having accountability and are susceptible to the laws of the land and by institutions established in terms of some acts and are traceable by all means. The financial inclusion can be made a reality by allowing some of the banks like RRBs, small private Sector banks to have chit fund schemes.Most of the Private sector banks in the south particularly in Kerala were basically Chit Fund operators and they were all doing well.Even the Govt run Chit Fund in Kerala has been performing well.Laws cannot improve the system,but proper approach to the problem and aspirations of the people can tackle the issue.Of course unethical persons and unethical business models like Ponzi Schemes have to be eliminated or rooted out completely from the society.

Dr.T.V.Gopalakrishnan
This comment in response to the article"It is naive to believe there is any law to end financial fraud appeared in ET )