Published On : Sat, Apr 27th, 2013

Investment Alert : Nagpur too mushroomed with dubious companies like Saradha!

Nagpur News: The recent outcry over Kolkata based Saradha group has opened a can of worms regarding odds in the series of such companies applying tactics to dupe the hard earned investors’ money. Saradha Group also finds its roots deep into Nagpur as once touted as the biggest investment fraud in the city happened at the behest of its sister concern Sanchayani Savings & Investment limited. Few of the people, especially the ones who have lost their money in the aftermath of overnight disappearance of company’s officials and closure of its branches, know of Sanchayani Savings and Investment. Apart from this, Nagpur has its own share of series of investment frauds every regular interval of time.

Tracking down the past, the city has many dubious chit fund and investment companies which lured the people’s money into their net, only to give them the shock of their lives. Hordes of people are still running from pillar to post to get their money back from the clutches of financial frauds allegedly committed by companies like Mahadev land developers, Kalamna urban credit cooperative society and host of other investment firms which still lure the innocent depositors to double up the investment in short period of time.

Till the time the investors realize the goof up, it gets already late. The only option such depositors have is to approach the court, which could be a long-drawn and expensive route to recovering money.

Even if the court orders that depositors be paid, it would be applied on a pro rata basis. And, in case the promoters have transferred the assets to another company, recovering money will be longer, say consumer experts.

Para-banking companies, which include chit funds and nidhi companies, thrive due to the absence of strong regulation and monitoring. They also offer very high interest rates, easy liquidity and convenience such as door-to-door collection by agents and option to deposit small amounts of money.

Be alert before you give in

If an agent of such a company approaches you, remember that anything that sounds too good to be true is probably not true. So, make sure to check what is the business the company is investing in and if it can be sustained over a long time. For instance, depositors who invested money in schemes that promised high returns by investing in emu farms and teak plantations got money in the initial period. But after a while these went bust as the business was not sustainable.

Check for registration

For chit funds to function, they must be registered with the respective state’s Registrar of Chit Fund Company. While there is a central government act regulating chit funds, not all states have implemented it and not all states have set up a Registrar for regulation of such companies. To verify if the company, whose agent is canvassing deposits is genuine one or not, ask for the certificate of incorporation issued by the Registrar of companies and for the registration number of the company issued by the Registrar of Chit Funds. In fact, the chit manager has to deposit 100 per cent of chit value, or the money collected, with the Registrar before the scheme begins.

Verify the directors

Ask for a list of directors of the company and verify for yourself the financial credentials of the diirectors. You must also ask for the chit agreement and go through the clauses. Ideally, the agent should provide a copy of the agreement to each subscriber of the deposit scheme before taking the money.

If depositors in the Saradha group’s scheme had taken these precautions, perhaps they would not have lost money. But most of them were not even aware of these measures, since they were illiterate, like the domestic help who committed suicide.