Kolkata, July 23 (IANS): Market regulator Securities and Exchange Board of India (SEBI) on Thursday said the state governments need to play a pivotal role to control and monitor the spread of chit fund and ponzi firms.

"This is a matter which cannot be controlled by one central agency - there is a three-tier approach required. The first level has to be state government. It is not possible for RBI or SEBI or any other agency," SEBI chairman U.K. Sinha told media persons here.

He was speaking on the sidelines of an event organised by Bharat Chamber of Commerce.

He said the state governments in various parts of the country have passed their own legislations on depositor protection to safeguard their interest and prevent any malicious acts from any chit fund firms.

"In that act, they have given wide powers to the district magistrate and the superintendent of police," he said.

Sinha referred to the recently amended act in Odisha, which has made it compulsory for the firms to get registered with the district magistrates before raising any money.

"If you are defaulting, then the district magistrate can impound all the assets, they can even issue arrest warrants and things like that," he said.

Sinha said a total of 20 states have enacted such laws to contain and monitor chit fund firms.

He said collections or fund raising exceeding Rs.100 crore from these firms needs to be monitored by the SEBI while collections less than Rs.100 crore need monitoring by the state governments.

"It is not possible for RBI or SEBI or any other agency. SEBI has got 700 employees and how can we work in close to 700 districts of the country?" he said.

Sinha also said there has to be coordination between the central agencies like the Reserve Bank of India or SEBI and the state government.