To several Keralites, the name Himalaya brings dreadful memories of a chit fund that duped them. There are quite a few others who have defrauded customers. Such entities continue to operate in the absence of effective regulatory mechanism and lack of awareness among people.

Satish Chandra Bose is one of the victims of a chit fund fraud. He had joined a chit fund based in Thrissur, for Rs.10 lakh with a 100-month subscription. He won the draw after 47 instalment, having paid Rs.4 lakh. He received Rs.3 lakh in cash while another Rs.1 lakh was given in the form of a certificate belonging to a sister concern. Soon, the company became bankrupt and Mr. Bose approached consumer court which asked the foreman of the company to pay Rs.2 lakh more to the complainant.

“I haven’t got the money even after several years of litigation,” says Mr. Bose. “The chit fund company owner had meticulously planned its exit; its assets were transferred to the name of relatives and the complainants got nothing on liquidation of the company”.

“The company used to take blank cheques as well as stamp paper to make documents from the customers while making the payment; they made entries in the passbook as ‘money paid’ even before the cash was given. All these were done purposefully,” Mr.Bose says.

Khadeeja, subscriber of a chit fund company based in Kozhikkode, was defrauded of her investment of about Rs.3.5 lakh. The modus operandi was different there. She joined a scheme of Rs.20 lakh with a monthly subscription of Rs.1 lakh. The fund is said to be backed by a few film stars. After three months, she was asked to enrol two others into the scheme. She refused, as no such condition was made known to her initially. She wanted to withdraw as she became doubtful of the fund’s credibility. But the managers refused to entertain the request on the ground that the scheme was meant for 20 months.

“I was asked to sign some papers initially and these are being used to deny the amount due to me,” she says.

Ms. Khadeeja admits her mistake in not going through the details contained in a document she had signed at the time of joining the scheme. She was paid Rs.70,000 only and feels miserable at being unable to get back the money.

In the sea of chit fund business, there are sharks who do money lending business under an established brand name, says Sugathan, a dairy farmer in Kollam, who sought Rs.25 lakh from such a company which has multi-business interests across Kerala. The man was given Rs.16 lakh under a security of 5 acre of land. When he asked for the remaining amount, the company sought mortgage of the land as ‘otti’ or possession for a stipulated period. The man refused, but the company asked to remit the entire amount with high rate of interest. “I had signed some papers initially trusting the fund managers,” Mr.Sugathan says, regretting the act.

The methods of duping the customer are wide and varied. “People are brainwashed by the cunning managers of several chit funds. They capitalise on people’s greed for money and are led into traps,” says Mr. Bose.

“Absence of a regulator to monitor the activities in the chit fund sector is a major hazard,” points out P. Rajendran, Managing Director of Kerala State Financial Enterprises.

“The entry and exit load is low in chit fund business, providing ground for fraudulent groups to enter the scene. It is high time that a regulator akin to RBI, TRAI, and IRDA is instituted in the chit fund sector,” he says.

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