Alarmed Bihar cracks down on chit fund companies

Patna: Alarmed at the big fraud committed to gullible investors by a chit fund company, Saradha group, in the neighbouring West Bengal, the state government in Bihar has issued an alert, advising the masses against falling into the traps of the non-banking companies promising hefty monetary returns. The government even announced to tighten nooses around these companies which have mushroomed up in recent years.

As news of Saradha groups’s cheating of poor investors continued making screaming headlines in local dailies, Bihar’s deputy chief minister Sushil Kumar Modi, who also happens to be finance minister, on Friday directed the state’s finance secretary to find out if the Saradha group was also operating in Bihar. He also asked the finance secretary to get detailed information about how many non-banking companies have their business going on in the state and what kind of saving schemes they have launched.

The state government has been quite specific in gathering information about chit fund companies, such as Saradha group of companies, Rose Valley, Prayag group of industries and Vishwamitra, all Bengal-based chit fund companies. Most of the groups are also in the media business, running newspapers, periodicals or 24X7 news channels. The Saradha group alone was running about a dozen newspapers and magazines that included The Bengal Post (English daily), Sakalbela Kalom (Bengali), Azad Hind (Urdu), Prabhat Barta (Hindi), Seven Sisters Post (English) and Panorama, a Bengali fortnightly. The group also owned Channel 10, a Bengali News channel.

“We can’t allow them to rob off the common men. We are going to initiate stern action against such companies engaged in cheating the gullible investors,” Modi saod on Friday, adding that the West Bengal-based companies were cheating the common men by promising huge returns on their deposited amounts. Stating that he had already requested the Ministry of Company Affairs to crack down on illegal activities of such companies.

According to Modi, the Security and Exchange Board of India too is sending its officials to Bihar to look into activities of such companies. Modi got this assurance from the SEBI chairman U.K. Sinha whom he met during his recent trip to Mumbai.

The Reserve Bank of India also is keeping a close watch on the situation in Bihar. The RBI said it had written to the SEBI chairman and also the head of the Economic Offences Wing to inquire into the shady activities of at least 10 such chit fund companies operating in the state.

“Chit fund companies lure the common investors by promising hefty interests on deposits. Strangely, their victims are not only the common men but even some retired RBI officials,” RBI regional director P.K. Jena said. He called for launching massive awareness drive in the region to stop such frauds, instead of depending only on laws.