People's Democracy

AIDWA Demands Immediate

Action in Saradha Scam

The All India Democratic Women’s Association (AIDWA) sent the following open letter to the finance minister on April 30

AIDWA is deeply concerned about the ongoing exploitation of poor women by chit fund operators, as exemplified by the recent Saradha Chit Fund scam in West Bengal. We bring the following details to your notice and urge immediate intervention, to stop the fraud, and to ensure justice to the lakhs of poor investors who stand to lose what little they have managed to save.

The Saradha chit fund scam that has broken out in West Bengal and other eastern states like Assam, Jharkhand, Orissa has destroyed the savings of some millions of small depositors including a very large number of women and is causing terrible agony to them.  It has resulted in suicides by affected investors, belonging to very poor families. Angry demonstrations, and attacks on offices of the company have shown the desperation of the affected people. In West Bengal alone there were about 40,000 agents collecting money for the Group of Companies, many of whom are absconding to avoid the wrath and despair of the depositors. The master-mind behind the scam, Sudipto Sen, has been arrested only a few days back with two of his close associates; but since the scam has a political dimension and every day links of interest between Saradha and some of the topmost leaders of the TMC - the party in power in West Bengal are being exposed before the public eye, the credibility of the investigation set afoot too late is being called into question.

There can be no doubt that the larger background for the growth of chit funds at this juncture is provided by the neo-liberal policy of the central government which weakens the functioning of financial institutions in the public sector and makes banks less and less accessible to small depositors. Small savings schemes which had been an important support for the economy in West Bengal and a safe haven for small depositors have been made less and less attractive by the central government and private mutual funds have been given more facilities. Particularly under the TMC regime in West Bengal, small savings have been severely depleted and small savings agents have themselves turned into agents for fly-by-night chit funds which collected 30 thousand crores (all over the country) from small depositors promising hefty returns or benefits from fraudulent companies in real estate, tours and travels, media etc. Sudipta Sen alone was the director of 155 companies and employed retired IPS and IAS officers and persons with entry to the corridors of power in the state at very high salaries. Once the bubble burst, the real losers were the small depositors, shopkeepers, daily wage earners, small producers, housewives, domestic workers. Many among them are women.

Although there is no specific central law to curb these private financial institutions, it is mandatory for them to take license from the Registrar of Companies; further they have to operate in accordance with SEBI guidelines. From the early 1980s, from time to time, such fraudulent companies involved in largescale cheating of ordinary people appeared in West Bengal. The then Left Front government had at that time taken measures to arrest the key persons under some existing sections of IPC, to attach their properties and to set up a legal authority to return as much of the embezzled money as possible to the depositors. In 2003, they had proposed and subsequently passed an Act unanimously to ensure the safety of depositors from fraudulent operators. This Act had been again amended and sent back after which it was left lying for a long time with the president for approval. In 2010 the state government had sent a report on the illegal operations of Saradha and some other chit funds to SEBI, on the basis of which SEBI had subsequently warned the new government which came to power in 2011, but no steps had been taken. After April 14, when Saradha suddenly wound up operations bringing thousands of cheated depositors all over West Bengal on the streets, the state government being under great pressure to dissociate itself from Saradha, took some steps which are still quite dubious. In stead of immediately attaching Saradha properties and starting the process of returning money to depositors, they have quite unnecessarily set up a Commission which will give its report only after six months. The CM who initially made an obviously malafide statement saying ‘What was gone was gone’, then announced a ‘relief fund’ of Rs 500 crore of which 150 crores would be realised from putting additional tax on tobacco products and urged people to ‘smoke more so that the money could be realised more quickly’. People feel that this is ‘relief’ not for depositors but for cornered Saradha operators. In stead of making use of the earlier Act pending with the president, if necessary with some amendments, she has announced a new bill (substantially the same) to be placed and passed in the assembly. This will cause further delay allowing Saradha operators to play for more time. One also does not know whether a new Act can be used retrospectively against Saradha even after it has been promulgated. Thus measures announced by the state government may very well turn out to be an indirect betrayal of the interests of small depositors and a ploy to go soft with the operators of chit funds.

AIDWA condemns this widespread exploitation of the poor, especially of poor women, and demands immediate intervention by the central and state governments to curb and regulate the chit fund operators.

The West Bengal state unit of AIDWA has already launched struggles and joint movements on this issue. It urges upon its activists everywhere to intervene on this issue, to extend full support to small depositors not only in West Bengal, but in other states as well.

We demand:

1) Strong legal and administrative measures at the national level to protect small depositors from fraudulent financial operators;

2) Easier access to public sector banks for small depositors;

3) Immediate attachment of all properties and accounts of the Saradha Group and setting up of a proper legal authority for returning deposits within a stipulated time;

4) Investigation of all chit funds in collaboration with central agencies like SEBI;

5) Enhancing facilities and incentives for small savings schemes;

6) Logistic support from government for continuous advocacy, especially among women, against investing with dubious financial institutions.