The chit-fund business continues to flourish in West Bengal despite the Reserve Bank of India (RBI) initiating action against two companies for misusing the regulator's name to invite deposits from the public.
In December, the RBI had issued advertisements against Sunmarg Welfare Society and Amazon Capital, clarifying that it does not give any guarantee to the investment options being floated by these two companies.
The investment options offered by the two companies included daily deposit schemes and fixed deposits at rates ranging between 12.36% and 13.42%. While some of the schemes were short-term, promising R532 against a daily deposit of R1 for 475 days, others were for 200 months offering R10,000 as maturity value against a one-time deposit of R500. The agents, who collected deposits from across West Bengal, Jharkhand and parts of Madhya Pradesh, were given on-the-spot commissions of 16%-33%.
Sunmarg Welfare Society, a company based out of Diamond Harbour, South 24 Parganas, claimed that it is an NGO approved by the ministry of corporate affairs and the RBI. Although the regulator has barred companies like Peerless and Sahara from collecting advances, more than a hundred chit-fund companies, most of whom have consciously left Kolkata out of bounds, have targeted the border districts of the state.
According to RBI sources, the worst affected districts are 24 Parganas (north & south), Hooghly, Malda and Cooch Behar. To bypass the RBI radar, these companies have also started issuing debentures, preferential shares and bonds. Instead of collecting deposits, some of them camouflage the amount as advance against land or consumer goods. With little awareness about financial instruments and their reliability, thousands of farmers and daily wage earners have fallen prey to the offers.
Earlier, Sebi had barred companies like Rose Valley Resorts and Plantations, Botanist Biotech Projects, Greeage Agrotech, Penacia Plantations, Rainbow Greenfields, Sonali Agro, Sree Agro and Teak Talk. Plantations from raising money from the people through collective investment schemes. But that has not stopped mushrooming of such deposit-taking companies. One of such chit funds, Indodeep General
Finance & investment, failed to pay deposit along with the interest and declared bankruptcy. While the regulator does not have any specific data on the quantum of amount being mopped up from the public, sources said it is well above R1,000 crore per year. The chit-fund companies flaunt their registration with the ministry of corporate affairs to instil confidence among investors.
According to RBI norms, chit-fund companies, classified as miscellaneous non-banking companies, can accept deposits from shareholders. But they have been prohibited from accepting deposits from public. Many of the chit funds have started showing investors as shareholders of the company to bypass the rule.