Thu. Mar 28th, 2024
Saradha Scam

The banning of Unregulated Deposit Schemes Bill 2018 has been introduced in the Lok Sabha by the Minister of State for Finance P.Radhakrishanan. The Bill bans unregulated deposit schemes and protects the interest of depositors. Unregulated deposit schemes are often termed as ‘Ponzi schemes’. These fraudulent schemes promise high rates of return for little risk.

Ponzi scheme was named after Charles Ponzi, a clerk in Boston who operated it first in 1919.

On Feb 20, Union Cabinet approved the bill that supported the complete prohibition of unregulated deposit-taking activity. In Budget 2016-17, Finance Minister Mr.Arun Jaitley announced a comprehensive central legislation to deal with the menace. In the next Budget, a draft of the Bill was placed in the public domain. ‘There is an urgent need to protect the poor and gullible investors from another set of dubious schemes, operated by unscrupulous entities who exploit the regulatory gaps in the Multi-State Cooperative Societies Act (MSCS Act), 2002’, he said.

The ₹2459 cr Saradha scam in 2013 spurred a series of events that led to a protest by defrauded investors.

Saradha scam 2013

Saradha Chit Fund was a consortium of 200 private companies that were located in West Bengal. With their short-term money making techniques, they lured investors into investing in their scheme. When the date to pay them back came up, they found another set of investors for another scheme to deposit their money. This money was then used to pay off the initial investors.

When the second set of investors had to be paid, they advertised fancy schemes to attract another set of investors. This deposit was paid back when the scheme matured. Therefore there was no real money being deposited or earned. This spiral continued until there was no money left to pay back investors. That was when the State government and the SEBI called for the CBI to intervene and investigate. But it was too late and a lot of investors were either left with little or no liquidity at all. They were bankrupt.

By Varsha Santosh

I like to learn more about the little complexities of life, money

Leave a Reply

Your email address will not be published. Required fields are marked *