It is like a Hindi film plot, where the police arrives, blowing whistles, only when the climax is unfolding. The same thing has happened with the gullible Indian small investor who has been looted by unscrupulous scamsters, while regulators like SEBI, RBI, Enforcement Directorate, Directorate of Revenue Intelligence and other law enforcement agencies and their political masters have been doing nothing. Just like the climax of a Bollywood film, all these actors have now woken up and arrived on the scene after millions of poor Indians have been duped of crores of rupees.
Approximately one lakh crore of rupees has been gobbled up by the chit (cheat) funds and other ponzi schemes. UPA I and UPA II were on the path of fiscal profligacy, yet our national savings rate was declining. The money going to the public was being siphoned off by these scamsters through their ingenious ponzi schemes. In May 2014, the Supreme Court of India, citing inter-state ramifications, possible international money laundering, serious regulatory failures and an alleged political nexus, transferred all investigations in the Saradha scam and other ponzi schemes to the Central Bureau of Investigation (CBI).
The moot point is, why does this happen again and again? gfiles’ cover story, written by Contributing Editor Neeraj Mahajan, is an attempt to understand the issue in detail. The poor get lured by the promise of big gains. Perhaps they want to discover short-cuts to change their destiny, when the system of governance has failed to do it.
Why is the system so helpless that it can’t protect the common citizen? The malaise is deep-rooted. The organs of the state have partly failed due to the ingenious machinations of these scamsters. They have the best brains at their disposal to detect loopholes in the law and, where there is none, people in positions of power to help them. Mahajan writes, “The crux of the problem is that there is no single regulator for the entire spectrum of investment schemes by NBFCs, banks and companies—governed by different laws and regulations leading to regulatory loopholes. The existence of multiple laws, multiple agencies, lack of clearly defined areas of responsibility and coordination gaps between regulators like the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), Ministry of Corporate Affairs and State governments only helps the shady operators trying to take advantage of the financial system.”
For now it is as simple as this—you loot and amass wealth, then dump the poor and hire a battery of lawyers and move the courts. In India, such court cases run virtually for infinity. The legal battle expenses are peanuts when compared to the booty of loot—running into thousands of crores of rupees. Even if a legal eagle is paid `50 lakh per appearance and even if the number of hearings is countless, the expenses so incurred pale into insignificance.
Narendra Modi is serious about financial inclusion of the poor. As long as scamsters are roaming scot-free, whatever may be done for financial inclusion of the common man will not yield desired results. The government has to seriously develop a mechanism to keep a tab on the fast-expanding financial world and loopholes within it. The matrix of these companies is designed to loot, and even a financial wizard would take years to track down the booty. We need to have a multi-dimensional, fast-track system to nab them and put them behind bars, just like a hardcore criminal. Severe punishment may deter them from looting the gullible poor; otherwise, at intervals of three-four years, the same scams will surface in different guises.
Vol. 8, issue 6 | SEPTEMBER | 2014