Had SEBI and local police acted fast, it would have reduced the scale of the fraud.


New Delhi: Multiple investigations have revealed that market regulator Securities and Exchange Board of India (SEBI) was alerted by various groups, NGOs and scholars about the alleged fraud perpetrated by the Bengaluru-based I Monetary Advisory (IMA) group of companies, but the market regulator failed to initiate timely action, sources have said. According to a source, the SEBI, as well as the local police, were alerted about the ongoing (IMA) ponzi scam, but not a single agency acted timely as that would have reduced the scale of the fraud run by IMA’s director Mohammed Mansoor Khan. “We had written a mail to SEBI; even a SEBI member had raised the issue about the IMA’s fraud which I came to know later. We even registered so many complaints with the local police, but all our efforts failed because of the inaction of the regulator and local police,” a source told The Sunday Guardian.

The IMA Group’s alleged fraud was unearth this year in March when tens of thousands of investors across Karnataka started coming out with complaints about default in payments by the IMA Group as the group had extracted around Rs 2,000 crore by way of running a ponzi scheme with the promise of having “Sharia” compliant norms—interest-free banking refers to a method of banking that prohibits interest-based banking and permits only a profit-sharing based banking model which is in line with Sharia law.

As per the Enforcement Directorate’s (ED) investigation, till now, the total number of complaints against the IMA Group have reached over 33,500 and now the Special Investigation Team (SIT) and the ED are auditing IMA related accounts to find out how the funds received as investments were diverted and not paid back to investors.

Experts see the absence of “Interest Free Banking” option as the reason behind IMA-like scams which target the minority community on the promise of providing an interest-free investment option. Speaking on the issue, H. Abdur Raqeeb, general secretary of the Indian Centre for Islamic Finance (ICIF), said: “The IMA Group scam is only the latest in a series of many such ‘halal trading firms’ that have been unearthed in Bengaluru and Telangana. Some of the more infamous cases in the past involved Ambidant Marketing, Injaz International, Heera Group and Ajmera Group. These ponzi investment firms have cheated lakhs of poor people from the minority community who have no option of interest-free banking.”

“We have been advocating for the establishment of an Interest Free Banking service in our country that can fulfill the inclusive banking dream of the minority community. We have written a letter to Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman and have put forward our demand. I believe the Prime Minister will provide inclusive banking rights to the minority community,” Raqeeb said.

“Nowadays, many Muslim countries and others including the UK, USA and Luxemburg have provided interest-free banking option to Muslims who usually resist using the conventional banking system due to their religious compulsion. Even RBI’s internal committee had suggested having an option of interest-free banking in the country. The RBI recommended that an interest-free banking window can be opened and it will ensure participatory banking. In 2008, the Kerala government had provided the some option of having interest-free banking, but that alone is not sufficient,” Raqeeb added.

In India, there are reportedly 200 small interest-free banking institutions in Kerala alone. The deposits of each of these banks range from Rs one lakh to Rs 10 lakh and they do not restrict their lending to Muslims alone.

Dr Shariq Nisar, an expert who teaches at the Institute of Management Studies and Research Mumbai, said: “Ponzi schemes have nothing to do with the lack of interest-free banking as there have been cases where people having full access to conventional banking been fooled by ponzi firms.”

“Ponzi firms are flourishing due to the inefficiency of the SEBI and it should be dealt with legally. In case of the IMA fraud, though the SEBI had prior information it failed to act on the ongoing fraud that was being run by a person who hails from the minority community and had plotted to cheat a specific section. We have seen that in ponzi schemes in West Bengal and Assam, the ponzi firms plotted to cheat people from the Hindus as well,” Nisar, who has been part of the BSE, said.

“Having said that, there is a need for the market to have an interest-free option for almost 20% of the country’s citizens unwilling to use the convectional banking system. The demand for an inclusive banking system for this huge potential consumer base should be considered.”

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