Millennium Post

Bursting bubbles of chit fund scams

With the Saradha group now gone bust, an entire gamut of companies engaged in wheeling-dealing ponzi schemes are now rightly under the scanner. However, the theatrical collapse of Sudipta Sen’s organisation, that peddled in other people’s money, mostly the poorest of the poor, has cast a massive shadow on not only the vulnerable depositors and gullible agents who still fall prey to the stupendous promises of these fraudulent schemes, but also has raised doubts on the efficiency of the regulatory bodies such as SEBI and RBI, who have shown an appalling lack of preparedness or precautionary measures to tackle these pecuniary swindles. In fact, the major chunk of the blame has to be shared by the governments at the Centre and state levels, as they failed to appreciate the severity of the problem and the grave danger it posed to lakhs of credulous people from the poorer strata of society. It is unfortunate not only because many of the actual deposit-taking and cheap credit-giving investment companies will be affected by the wave of public anger leveled against the ponzi schemes, but also because cracking down on the big defaulters alone will not be enough to rebuild confidence in public faith. In fact, the whole of the financial system in India is up for an overhaul, is this breach of trust has to be really mended.
What needs to addressed at present is the gaping hole in the regulatory mechanisms that license new schemes and ensure that the old ones operate according to the legal provisions. Furthermore, SEBI, RBI and other government bodies have to tighten the leash on who can enter the lower level investment and insurance schemes, such as mutual funds, chit funds and other such arrangements, in order to bar potential fraudsters from committing larceny in future. But mere regulations, no matter how watertight they turn out to be, cannot alone ensure the complete eradication of instances of cheating and swindles, because greed and corruption are endemic in our system. Albeit regulators need to spike up their hold on the mainstream financial system, particularly banks, non-banking financial corporations (NBFCs) among others, the government too needs to have a stronger grip on these transactions to eliminate sham deposit-raising credit-distributing organisations that try to take legal succor under more respectable fronts such as media outlets, NGOs and even a place in the thriving film and music business. However, despite the government instituting the Serious Fraud Investigation against Saradha and its affiliates, while dragging several others under the scanner, checking the spread of such unauthorised money-making schemes needs more supervision. Although, Mamata Banerjee has announced the Rs 500-crore relief fund for the chit fund duped under Saradha scam, it will not cover the trouncing of public money and will not ensure return of all the financial losses incurred by the trusting depositors.
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