MPs seeks ban on chit funds

Based on government’s acceptance that proliferation of chit funds and instances such as Sharda chit fund scam indicate a failure of the government and regulatory agencies, the Parliamentary Standing Committee on finance is advocating a pan-Indian closure of all chit fund companies.

The panel headed by Yashwant Sinha is also likely to call Reserve Bank of India governor D Subbarao for discussions on May 24 on the issue.

Recently, investors of Shardha Group lost their savings and a few committed suicide when the group got busted.

Led by economic affairs secretary Arvind Mayaram, about a dozen top finance ministry and commerce ministry officials represented the government stand on the matter before the committee. A source close to the development told dna, “The officials accepted that the chit fund proliferation was indeed a failure of the regulators as well as the government.

The officials also could not peg the number of chit fund operators active in the country.

More meetings will be held with the government on the matter.”

The source said that the panel is likely to advocate the closure of all the chit funds active in the country. The deliberations, meanwhile, will continue on the matter and the committee is likely to call RBI governor on May 24. Also chairman of Securities and Exchange Board of India may also be called to represent before the committee.

Apart from Mayaram, the other government officials present were banking and financial services secretary Rajiv Takru, Corporate Affairs Secretary Naved Masood, and officials from the revenue department, Enforcement Directorate and Central Board of Direct Taxes.

The Parliamentary Standing Committee, chaired by BJP leader and former finance minister Yashwant Sinha, which met to discuss the chit fund scam, was of the view that there should be a “single law and a single regulator” to deal with investment schemes, sources said.

The Committee examined the issue in the presence of top officials of finance ministry and corporate affairs ministry and representatives of SEBI, RBI, Enforcement Directorate and Central Board of Direct Taxes. The parliamentary panel has asked the Finance Ministry to submit a written reply on the operation of such investment schemes in the country and preventive actions taken by them.

A member of the panel and CPI leader Gurudas Dasgupta understood to have attacked finance ministry for the Saradha fiasco terming it as complete failure of the government.
According to sources, Gupta lamented that the finance ministry’s various wings including revenue intelligence, enforcement directorate and income tax department could not spot something fishy in the schemes which was offered openly in newspapers.

Gupta is believed to have said that the finance ministry and even the state government could not find out that paying over 30% returns on investment was untenable. Among other department of economic affairs secretary Arvind Mayaram, corporate affairs secretary Naved Masood and representative from other wings of finance ministry including department of financial services and department of revenue attended the meeting. 
—With Agency inputs

The Saradha saga
The multi-crore chit fund scam was detected following the closure of several media houses run by Saradha group, which defaulted on repayment to lakhs of investors.

Saradha group chief Sudipta Sen was arrested from Kashmir along with his close aide Debjani Mukherjee and another employee Arvind Chauhan.

At least 13 agents and depositors of Saradha and similar chit fund companies have committed suicide, while offices of a large number of such dubious concerns in the state have been attacked.