Posts Tagged ‘SEBi Guidelines for NBFC’

Chit Funds :The Simple Business of Cheating Poor People – Rule Roost In Odisha

Chi Funds - Swindling Millions from people

Chi Funds - Swindling Millions From People of Odisha

Ever since Sudipta Sen, the beleaguered head of the tainted Shradha Group hit the headlines for his  audacity and brazenness in making crores by swindling innocent people through his chit fund company, there have been “crackdowns “  on such money circulation companies in Odisha. Till late evening, police arrested as many as 110 functionaries of different companies, detained more than 80 people and registered more than 97 cheating cases against several illegal NBFCs in the state. While  raids were conducted on 50 dubious “chit fund companies” across 185 different locations in odisha, the police action is expected to grow stronger in the coming days.

While the state government has currently no data of the number of NBFCs, chit fund companies and money circulation firms existing in Odisha and the volume of money invested, police expect that they would be able to find out those details after the end of the ongoing raids. Interestingly though, whistle on the obnoxious ways of chit fund companies was blown in Odisha much earlier. It was in the year 2009 that the Bollywod actor producer Naseer Khan was first charged and later arrested for swindling innocent people from Odisha through his chit fund company “ Fine India Sales”.

While questions are being raised now why noose were not tightened on the chit fund companies even after the “Fine India “ scandal, what actually should invite attention of the sleuth is “ what actually makes Odisha a teeming ground for the burgeoning  chit fund companies?”

Though the general notion is that people of odisha aand other eastern states of the country are gullible, what actually matters is the fact that the Chit Fund Companies take advantage of the weak legal framework. While the RBI and SEBI have specific guidelines for operations of NBFC’s in India , there are no guidelines that control the  Chit fund companies. This apart, the legal provision of imprisonment of only two years for the culprits found cheating people through chit funds, is actually not a deterrent for unscrupulous people in this business.

In Odisha, the State Legislative Assembly passed the Odisha Protection of Interests of Depositors (Financial Establishment) Bill, 2011, making provision of punishment against unscrupulous chit fund companies. The Bill still awaits the President of India’s assent. The provisions of the bill specifies that if a person is found guilty of cheating people of their money, he could serve jail term for 10 years and his/her properties could be confiscated . The proposed Act has the provision of returning money to investors by selling properties of the culprits.

The Bill once it gets presidential nod will no doubt provide respite to victims of fraud and also serve as a deterrent to the dubious “cheat fund” companies. But what matters now is what will happen to people who have been defrauded by these companies now? An estimate proves that  chit fund companies have looted to the tune of Rs 1,500 Crore from investors in odisha alone.  Companies like Seashore securities that cheated to the extent of Rs 600 crore , Ashore, Safex, Sai Pragati, Star Consultancy and Florish India are yet to return the money to their investors.

Nothing describes the angst among the people better than the fact that  on a single day on may 2  at least 127 hapless depositors made a queue to lodge their complaints with the State Crime Branch against the Saradha Group at Baleswar. The company, it is estimated has swindled to the tune of  Rs 50 crore from Baleswar only.

In a way, the unsuspecting investors now don’t have any other option but to blame it on their fate for putting their hard earned money with these swindlers!