JAIPUR: The state government has not only failed in policing fraudulent financial activities but is also unsuccessful in regulating the existing law against such firms. So far, Rajasthan government has not notified the Central law - Prize Chits and Money Circulation Schemes (Banning) Act, 1978 - in the state despite repeated reminders from Reserve Bank of India. This Act covers the companies which operate in a similar manner like multi-level marketing companies. Money circulation schemes promises investors to become rich overnight. Such schemes work on the basis of enrolment of new members into process. A promoter promises that by enrolment of members into such a scheme, one would be getting back not only the initially paid investment but also keep gaining financially will further enrolment of new members into the chain. Thus, the number of members keeps increasing and the chain multiplies. The initial financial gains made by the earlier members encourage others to invest. However, at one stage, the bubble bursts, leaving several members at a loss but the promoters who are the initial investors in the chain kept the profits. Several firms are operating in the state using the modus operandi. "Many companies involved in money circulation are operating from the state. They lure investors by showing them big dreams. However, it turns out to be nightmare for them," an RBI official said. A chit fund company, which collects money from various investors and give prizes to few lucky investors through a lottery or some draw, can operate if approved by the state government. But Rajasthan has neither given consent by legalising it nor has made any efforts to restrict it so far. This leaves a grey area for fraudulent companies to run their dubious schemes.
TOI
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