A circuitous route for embezzlement
Saturday 27 April 2013
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The collapse of the Saradha
Group, a West Bengal based chit fund company and a swirling political
controversy that it has triggered reinforces the fact that chit fund frauds are
a part and parcel of the problems faced by those who invest in dubious ventures
and bogus schemes, hoping to get high returns. Despite several advertisements
by the government warning the public and articles written in financial
newspapers and magazines of chit funds being cheat funds, people get trapped in
Ponzi schemes designed and operated by unscrupulous promoters who promise
extraordinary returns in a short period of time. The underlying principle of
operation of most of these firms is that high returns are associated with high
risks. As long as there are increasing number of investors who bring with them
a steady stream of fresh deposits, the promoters overwhelm their investors with
increasing returns. This induces gullible citizens to invest more in such
fraudulent schemes and consequently a legion of chit fund companies start
mushrooming in different parts of the country, violating the guidelines of the
RBI (Reserve bank of India) and SEBI (Securities and Exchange Board of India). Most
of these schemes exploit the financial illiteracy of the investors to garner
huge wealth and in many instances operate in connivance with politicians and
officials of regulatory agencies.
Such is the zeal shown by the
investors that they do not feel deterred to even mortgage their materialistic possessions
to invest all their hard-earned savings in these ‘attractive and promising’
schemes to earn quick money. It seems the fact that there is no thing called a
free lunch is yet to be realised by a large section of our society! Even when
we have a variety of investment options with the Post Offices and government
banks, investors feel lured to take this circuitous path to ‘prosperity’, only
to wake up to a dreadful nightmare - losing both their money and soul.
Thanks to the shoddy
investigation carried out in the aftermath of revelation of the hostile designs
of such Ponzi schemes, the economic offenders and their accomplices are seldom
probed or prosecuted and their illegal funds confiscated. The failure of the
government to take timely action against them further exacerbates the recovery
of funds from such illegal agencies.
The need of the hour is to crack the whip on all such dubious activities that exploit the dark areas of law where the role of financial regulators has not been explicitly spelled out and thus breed a parallel economy. The investors ought to be vigilant while accepting the terms and conditions of such schemes. The media need to play a proactive role in making the public financially literate. Investors should avoid investing in risky avenues and instead, prefer investment opportunities with the banks.
Categories:
common man,
corruption,
crime,
development,
dream,
funds,
illiteracy,
India,
money,
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