 "Money-pooling firms resurface in Bengal")
Almost three years after the Saradha scam eroded the savings of millions of people in West Bengal, a resurgence of newer forms of financial scams have taken place in the eastern part of India.
Recently, the Reserve Bank of India (RBI) in Kolkata threw light on the issue by cautioning media outlets from carrying advertisements of illegal companies providing loans, mostly to people with poor credit records.
"These companies provide hassle-free loans with minimum paperwork and also claim to be registered with the Reserve Bank of India," RBI said in a statement, adding, in some cases, only one mobile number is provided with the names of the companies.
"Over the last six months, there has been a new kind of financial fraud taking place in Kolkata. Earlier, many fraudulent companies would work in guise of tour operators or travel agents. Now, their mode of operation has changed. Most often, these companies offer as much as 10-40 per cent monthly returns on deposits. In several cases, companies are offering these through illegal channels and taking possession of collateral," said Subir De, president of the depositors' association.
According to intelligence inputs collected by RBI, most of these fraudulent companies charge a processing fee and legal fee from a prospective borrower, but the loan is never credited.
"Over the last six months we have been observing an increase in the number of companies offering fake financial products. We have stepped up efforts towards creating general awareness against such companies," said an RBI spokesperson.
Another form of financial scam, which has surfaced in Kolkata is around insurance companies. According to De, many unscrupulous agents have been seeking a lump-sum or one-time premium from investors, while investing the same in regular or yearly premium policies, while earning high commissions from insurance companies.
According to information at Sachet, a website for coordinated efforts from regulators and state governments towards tracking illegal money-pooling companies, the Insurance Regulatory and Development Authority of India (Irdai) had issued a public notice against a Kolkata-based firm, AKPCL General Insurance Company, for cheating investors. The company had been operating without Irdai's approval.
Similarly, in an order dated September 21, Sebi had hauled up another Kolkata-based company, Waris Finance and Investment Limited, for issuing debentures to raise public money.
Under Section 67 of the Companies Act any issue of preferential shares to more than 50 people would be deemed as a public issue, requiring Sebi's clearance.
This apart, over the past few months, several companies in the food processing sector have been offering agro bonds, without Sebi's approval, according to the RBI spokesperson. Earlier, Sebi had also warned investors against "potato bonds" issued by a number of companies in West Bengal. Under the scheme, funds collected from the public are used to buy potatoes from the market on behalf of the investors when the price is low and preserve them in their own cold storage. The potatoes are sold when the market price rises. It takes 15 months to complete the whole business and return to the investor the sale value of his potatoes.
Notably, around 2013, while Saradha had defaulted on payments to the tune of Rs 2,400 crore to 1.25 million depositors, MPS and Rose Valley together owe Rs 5,860 crore to their investors. All of them had been running illicit money-pooling companies in one form or another.
SCAM 2.0 According to information at Sachet, the Irdai had issued a public notice against a Kolkata-based firm for cheating investors
Recently, the Reserve Bank of India (RBI) in Kolkata threw light on the issue by cautioning media outlets from carrying advertisements of illegal companies providing loans, mostly to people with poor credit records.
"These companies provide hassle-free loans with minimum paperwork and also claim to be registered with the Reserve Bank of India," RBI said in a statement, adding, in some cases, only one mobile number is provided with the names of the companies.
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Around six months ago, Amanatkari and Agent Suraksha Mancha, a forum of small depositors, wrote to the Securities and Exchange Board of India (Sebi) and RBI, requesting the regulators to take action against, a resurgence of fraudulent companies raising public deposits and giving loans over the past six months. The association claims that close to 200 such companies are operating in West Bengal.
"Over the last six months, there has been a new kind of financial fraud taking place in Kolkata. Earlier, many fraudulent companies would work in guise of tour operators or travel agents. Now, their mode of operation has changed. Most often, these companies offer as much as 10-40 per cent monthly returns on deposits. In several cases, companies are offering these through illegal channels and taking possession of collateral," said Subir De, president of the depositors' association.
According to intelligence inputs collected by RBI, most of these fraudulent companies charge a processing fee and legal fee from a prospective borrower, but the loan is never credited.
"Over the last six months we have been observing an increase in the number of companies offering fake financial products. We have stepped up efforts towards creating general awareness against such companies," said an RBI spokesperson.
Another form of financial scam, which has surfaced in Kolkata is around insurance companies. According to De, many unscrupulous agents have been seeking a lump-sum or one-time premium from investors, while investing the same in regular or yearly premium policies, while earning high commissions from insurance companies.
According to information at Sachet, a website for coordinated efforts from regulators and state governments towards tracking illegal money-pooling companies, the Insurance Regulatory and Development Authority of India (Irdai) had issued a public notice against a Kolkata-based firm, AKPCL General Insurance Company, for cheating investors. The company had been operating without Irdai's approval.
Similarly, in an order dated September 21, Sebi had hauled up another Kolkata-based company, Waris Finance and Investment Limited, for issuing debentures to raise public money.
Under Section 67 of the Companies Act any issue of preferential shares to more than 50 people would be deemed as a public issue, requiring Sebi's clearance.
This apart, over the past few months, several companies in the food processing sector have been offering agro bonds, without Sebi's approval, according to the RBI spokesperson. Earlier, Sebi had also warned investors against "potato bonds" issued by a number of companies in West Bengal. Under the scheme, funds collected from the public are used to buy potatoes from the market on behalf of the investors when the price is low and preserve them in their own cold storage. The potatoes are sold when the market price rises. It takes 15 months to complete the whole business and return to the investor the sale value of his potatoes.
Notably, around 2013, while Saradha had defaulted on payments to the tune of Rs 2,400 crore to 1.25 million depositors, MPS and Rose Valley together owe Rs 5,860 crore to their investors. All of them had been running illicit money-pooling companies in one form or another.
SCAM 2.0
- Close to 200 fraudulent firms are operating in West Bengal
- Most of these fraudulent firms charge a processing fee and legal fee from a prospective borrower, but the loan is never credited
- Apart from loans and deposits, another form of financial scam which has surfaced in Kolkata is around insurance firms