May 10, 2013

DC debate: West Bengal govt responsible for the chit fund scam?

DECAN CRONICLE, A.B. Bardhan/Sultan Ahmed | 02nd May 2013

Trinamul patronised Saradha  

A.B. Bardhan, senior leader of the CPI

The chit fund scam in West Bengal has left lakhs of people lamenting the loss of their life savings.

Majority of them are poor and daily wage labourers who do not even have bank accounts. They were lured into contributing their daily, weekly or monthly earnings to the chit funds, which generally paint a rosy picture about the amount getting doubled within a few months. 

These are ponzi schemes. Such schemes are not regulated, but are allowed to advertise that all the benefits would go to the depositor in the form of real estate or multiplication of their amount. In the absence of regular employment growth, many young people become agents of such chit funds. Thus, it becomes a huge mechanism for defrauding people and plundering their small earnings. In West Bengal, there has been no economic development for over a decade. These chit funds generally get their nod from the Centre, such as the RBI, finance ministry and so on.

During the Left Front’s rule, one such chit fund was exposed and after that the government adopted a law to punish the evildoers and return the money of the depositors. But for some reason, this law did not get the approval of the President. Certain amendments were made and the new bill was adopted in 2009. This, too, awaits the signature of the President. 

However, after a series of complaints against chit funds, Securities and Exchange Board of India (Sebi) launched an investigation and wrote to the West Bengal government the fraud that was going on. But the Trinamul Congress government, which had replaced the Left Front government, refused to act on Sebi’s warning. 

Chief Minister Mamata Banerjee claims that she was not aware and came to know only recently about the fraudulent activities of these chit funds, in particular, the biggest of them, known as the Saradha Group. The Saradha Group has collected several thousands of crores of the poor people’s earnings, and with that it also acquired several media companies and TV channels. The Saradha Group and the Trinamul Congress were actively working in tandem. 

Today, the bubble has burst. Several lakhs of poor people have been looted of their entire earnings without any hope of recovering the money. Three people have committed suicide and others are in despair. The main offenders, the bosses of the Saradha Group, were on the run perhaps with the knowledge of several higher ups in the Trinamul government. They were ultimately apprehended from a hotel in Jammu and Kashmir. The CID and the Kolkata Police are investigating the roots and branches of this fraud, the like of which West Bengal has never seen before. 

The Trinamul government has much to answer for this. The names of two Trinamul MPs that have been in news in connection with the fraud is only the tip of the iceberg. How is such financial fraud possible without the active connivance of the government? Ms Banerjee herself was present at the promotional event of the Saradha Group. The CBI should be asked to conduct for a complete inquiry into this.

(As told to Thufail PTI)

The Left,  SEBI are to blame

Sultan Ahmed, former Union minister and an MP (Trinamul Congress)

It’s too simplistic and politically motivated to blame the Trinamul Congress-led West Bengal government for a chit fund company run by the Saradha Group going bust and, consequently, duping a large number of small investors of their hard-earned money. First and foremost, this money business being run in the name of chit fund is not new for the country or West Bengal.

These have been mushrooming for the past several years and people had been victims of this earlier too. In 1980, during the rule of the Left Front government in the state, small investors in West Bengal were duped of their hard-earned money by chit fund companies like Sanchayita Invest-ment, Overland Invest-ment etc. In these cases, middle class and educated people living in the urban areas were deceived.

During the Left Front regime, the chit fund companies spread their wings into the rural areas of West Bengal, with each village having a couple of their offices. They have been operating for the last 20 years. The Saradha Group may have gone bust, but there are 70 to 80 such companies still operating in the state.

How can the state government be held res-ponsible for the Saradha Group duping the people? In our country, we have a number of regulators for the financial market, including the Reserve Bank of India (RBI), income tax department of the ministry of finance, Securities and Exchange Board of India (Sebi), Registrar of Companies (RoC), etc. Why were all these financial regulators sleeping for the past 20 years when such chit fund companies mushroomed and spread their wings in rural areas?

It’s not a case of West Bengal alone. Assam chief minister Tarun Gogoi has also complained against the operations of such companies in his state. Therefore, blaming the West Bengal government for the chit fund scam will serve no purpose.

Importantly, the state government had, in 2003, got a legislative proposal to regulate and check chit fund companies passed in the West Bengal Assem-bly, but is still awaiting the nod of the President. The state government has constituted a probe to inquire into the Saradha Group scam and Chief Minister Mamata Banerjee has set up a corpus fund of Rs 500 crore. She has said that the poor people who have lost their money will get their savings back. But no one is questioning the dereliction of duties by the financial regulators, including the RBI, Sebi, RoC etc. Why?

So far as two MPs of our party are concerned, they are cooperating in the probe. While one was connected with a news daily, another was the chief executive officer of the printing and publishing firm owned by the Saradha Group. If they are found guilty, the party will definitely take action against them. 

The Opposition Left Front is clearly trying to take political advantage of the issue. However, people will realise in the end that it was dereliction of duty on the parts of the earlier Left Front government that such chit fund companies mushroomed. People will not fall prey into the Left Front trap again. It’s commendable that Ms Banerjee has taken swift action to address the woes of the people. 

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