Many fly-by-night operators are doing brisk business in the State

In the wake of the collapse of the Ponzi scheme run by the Saradha Group in West Bengal, the Chhattisgarh government is setting up a registration authority to control non-banking financial companies (NBFCs).

It will scrutinise the financial health of the chit funds operating in Chhattisgarh. Both the existing ones and the new companies will have to get approval from this authority.

At this point, the State government is not aware of the number of registered or un-registered chit funds or Ponzi schemes operating out of Chhattisgarh, even while the State has adopted the Chit Funds Act of 1982. But the officials are aware that a large number of fly-by-night operators, dealing in both chit funds and Ponzi schemes, are doing brisk business.

Sometime in the coming week, the Chhattisgarh government will be issuing the notification for establishing a registration authority under the 1982 Act. “We will look into the private companies which raise investments from the public once the registered body is notified next week, State Finance Secretary D.S. Mishra told The Hindu.

Certification

The Commissioner (Treasuries and Accounts) – or the Registrar of Chits – will be the registering authority. District Collectors will be additional registering authorities; the authority will have to certify a company before it seeks investment. The authority will also act as a regulatory body, the officials said.

Several chit funds of West Bengal and other States have been raising funds from small investors in the central and eastern States of Chhattisgarh, Jharkhand, Orissa, eastern Maharashtra, Bihar and Assam over the years.

One of the companies which entered the tribal areas of the these States was the Saradha group of West Bengal, which recently collapsed raising concerns about the Ponzi schemes marketed as legal chit funds. The arrest of Saradha’s chairperson, Sudipto Sen, and the CEO of the group’s media arm, Trinamool Congress MP Kunal Ghosh, has raised questions about the connections between fraudulent financial companies and the political parties.

Alarming situation

Shamlal Kunjam is a 25-year-old employee of the National Mineral Development Corporation (NMDC) at Kirandul in Dantewada. Every month he deposits Rs. 1,100 with a Kolkata-based company, Rose Valley, assumed to be a chit fund, in Chhattisgarh. Mr. Kunjam has been told that Rose Valley is a government-backed banking company.

An agent of Rose Valley, Sandeep Lakhra, introduced me to the company. He told me it is a banking company that gives good returns on investment. “I have deposited nearly 15,000 in the last one year. Several workers of the NMDC routinely deposit savings with Rose Valley,” Mr. Kunjam said.

While Mr. Lakhra was not available for comments, the spokesperson of Rose Valley said that the company is neither a chit fund nor an NBFC.

“We [Rose Valley] do not have any investment scheme. We do not sell any financial product so there is no question of investors and investments,” the spokesperson said in an e-mail interview to The Hindu. Rose Valley defined itself as a “time share company.”

“What we have are customers who have subscribed to time share in our hotels across India owned or partnered by us. As on date we have 23 properties owned by us and 22 properties under various stages of construction,” the spokesperson said.

However, the company acknowledged that in the last two years, it had acquired around 15,000 regular clients in the State and the volume of business reached around Rs. 20 crore in the same period.

But with one of the seniormost bureaucrats of the State, D.S. Mishra, planning to look into the papers of private companies raising investments, scores of non-banking firms of Chhattisgarh may come under scrutiny in the coming months.

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