It is not just investors who suffer when an unregistered chit fund operation collapses: often the operators also become casualties.
In March this year, a Siddapura resident committed suicide after her chit fund business went under. Kausalya (36) had been running the operation for a few years and she went into depression after suffering losses, the police said. She hanged herself to death.
It was a double whammy for autorickshaw driver Mallesh, who finally took a similar exit route. The 27-year-old, who was running an illegal chit fund, agreed to be the guarantor to a few autorickshaw drivers to help them get loans from private financiers. When the drivers did not return the loans, the financiers turned on Mallesh. The unbearable pressure led him to commit suicide.
Nagesh, a Jayanagar resident, whose relative suffered losses by investing in unregistered chit funds, said: “Many of us get tempted by the get-rich-quick formula and invest in such funds. However, these are shortcuts and there is no guarantee you will succeed. After my family suffered losses, I don’t think I will ever take a chance with such funds.”
G. Kumar (44), a technical support staff of HP, drowned himself in the Ulsoor Lake after his wife suffered losses in the chit fund business she was running.
Got away lightly
Vivek J., an employee of a private firm, emerged relatively unscathed. “We had invested Rs. 5,000 in a private chit fund company based in Gujarat. Every month we used to deposit a few hundred rupees in its Bangalore branch but we lost all of it when the fund ran into problems. We [invested] as we went by the advice of a relative,” he said.
Some have been lucky to get part of the investment back. One of them is Uma Maheshwari, a homemaker in Ulsoor, who invested in a chit fund last year.
“I was approached by a man who introduced himself as an officer from a financial company and said I would get Rs. 1 lakh in returns. So my family gave Rs. 5,000 to this man. We didn’t see him again,” she said.
Ms. Uma said that he was part of a group that had cheated people. Following her complaint, the men were arrested but she got back only Rs. 3,000.
Latha of Basavanagudi had invested her savings of Rs. 75,000 in a chit fund scheme. To her shock, the operator closed his office overnight. As he had given only some slips and no documentation, she could not proceed legally against him.
However, very many still continue to invest with such chit fund operators, particularly those who find it difficult to access credit. Rajeshwari, a domestic help, said: “I have been investing in chit funds for some years but have never faced any problem. Also, the investments I make are small amounts.”