<p>The collapse of the Saradha group in West Bengal, which led to loss of the hard-earned money of lakhs of people who invested in its chit funds, is not an isolated event. Many other fraud companies have done the vanishing act in other parts of the country also after raising money from common people. <br /><br /></p>.<p>The clout of owners and promoters, political connections, inadequate laws, lack of regulatory and supervisory control and human greed have all combined to make chit funds veritable financial black holes which sap money, giving pain in return. Two affected persons have committed suicide in West Bengal and the life-time earnings of many have been washed away. The Rs 500 crore fund set up by the state government to give relief to the victims will not help most of them. The means of raising state funds to help the victims of a private fraud is also bound to be questioned.<br /><br />The owner of the group, who was on the run, has been arrested and his disclosures have thrown light on the strong connections the group had with leaders of the Trinamool Congress and possibly with others. The political links were used by the group to safely resort to gross irregularities, and politicians would have used the group for easy and unaccounted funds. The company even created media organs to safeguard itself. At least one Trinamool Congress leader was closely involved in the media operations. Even when it was known that the group was failing, the state government did not take any remedial steps. Now it is blaming the Centre and the previous Left Front government for not having created the legal framework to deal with the irregularities.<br /><br />Chit funds, which are popular all over the country, need closer scrutiny and better regulation. These ventures, many of which operate across states, are nominally governed by inadequate state legislation. The Saradha group raised Rs 20,000 crore from the public but there was no checking or monitoring of the use of funds. Punishment for fraud is rare. RBI and SEBI rules and regulations on investments apply to banks, mutual funds or other structured financial bodies. There is need to fill this regulatory vacuum and to bring the chit funds and other similar money-raising schemes under effective scrutiny. Some of them even operate at the personal level. It is this lax accountability that attracts politicians also to them. The public should also exercise caution in dealing with such companies.</p>
<p>The collapse of the Saradha group in West Bengal, which led to loss of the hard-earned money of lakhs of people who invested in its chit funds, is not an isolated event. Many other fraud companies have done the vanishing act in other parts of the country also after raising money from common people. <br /><br /></p>.<p>The clout of owners and promoters, political connections, inadequate laws, lack of regulatory and supervisory control and human greed have all combined to make chit funds veritable financial black holes which sap money, giving pain in return. Two affected persons have committed suicide in West Bengal and the life-time earnings of many have been washed away. The Rs 500 crore fund set up by the state government to give relief to the victims will not help most of them. The means of raising state funds to help the victims of a private fraud is also bound to be questioned.<br /><br />The owner of the group, who was on the run, has been arrested and his disclosures have thrown light on the strong connections the group had with leaders of the Trinamool Congress and possibly with others. The political links were used by the group to safely resort to gross irregularities, and politicians would have used the group for easy and unaccounted funds. The company even created media organs to safeguard itself. At least one Trinamool Congress leader was closely involved in the media operations. Even when it was known that the group was failing, the state government did not take any remedial steps. Now it is blaming the Centre and the previous Left Front government for not having created the legal framework to deal with the irregularities.<br /><br />Chit funds, which are popular all over the country, need closer scrutiny and better regulation. These ventures, many of which operate across states, are nominally governed by inadequate state legislation. The Saradha group raised Rs 20,000 crore from the public but there was no checking or monitoring of the use of funds. Punishment for fraud is rare. RBI and SEBI rules and regulations on investments apply to banks, mutual funds or other structured financial bodies. There is need to fill this regulatory vacuum and to bring the chit funds and other similar money-raising schemes under effective scrutiny. Some of them even operate at the personal level. It is this lax accountability that attracts politicians also to them. The public should also exercise caution in dealing with such companies.</p>
