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June 9, 2011

Kisan Patra may go on money laundering threat

MPIPASP | 21:12 | Best Blogger Tips
 NEW DELHI: Concerns over misuse of the popular small savings scheme Kisan Vikas Patra (KVP) for money laundering may prompt the government to wind up the scheme. A panel headed by Reserve Bank of India deputy governor Shyamala Gopinathhas recommended an end of the scheme as KVP is prone to misuse. 

It also said the continued popularity of both KVP andNSC among the urban population, who are not small savers, could be prompted by an incentive to avoid tax. NSC and KVP are the two most popular savings schemes and together accounted for nearly half of the total small savings corpus as on March 2010.

The UPA government is facing criticism for its inability to check generation of black and has taken several steps to strengthen and streamline laws and procedures to check proliferation of black money. It has set up several panels to investigate and estimate the extent of black money in the system.

An official said KVP was more popular as it was a bearer-like instrument and possibility of misuse is very high. "While there is no evidence to suggest that KVP was being used for money laundering purposes, it was found that often some investors made bulk purchases and later on transferred them to others," said the official, who did not wish to be identified.

The panel said it had noted the observations made on KVP and national savings certificate by theRakesh Mohan committee that both these instruments were quite expensive in terms of the effective cost to the government and should be discontinued. "In view of recent developments on Anti Money-Laundering (AML)/Combating the Financing Terrorism (CFT) front, the committee recommends that KVP should be discontinued," the panel said.

The panel has also called for enforcing strict Know Your Customer (KYC) norms for all small savings to prevent money laundering and generation of black money.


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