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INDIA NEWS NETWORK

RGESS Sees Mis-Selling, Illegal Cash Paybacks

Rajiv Gandhi Equity Savings Scheme (RGESS), the government’s pet project to bring retail investors into the stock market, is just a few months old, yet some unscrupulous mutual fund (MF) distributors, with the help of select fund houses, have started offering cash payback as high as Rs 7,000 per Rs 1 lakh of investment in this scheme. The practice of payback, which is illegal, is proliferating because some fund houses are finding it tough to raise money for RGESS plans as the financial year ends in two weeks and there are not enough small investors willing to invest in these schemes. 
    
According to Sebi rules, if an MF scheme can’t garner Rs 10 crore, it should be wound down and all the money be returned to initial investors. Desperate, fund houses are paying distributors as much as 7.5% of what customers invest in RGESS plans, of which up to…

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