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WB chit fund scam: What forces people to invest in ponzi schemes?

May 14, 2013 09:11 AM IST Politics Politics

Kolkata: As the Calcutta High Court begins hearing pleas seeking a CBI probe into the Sharada group chit fund scam on Tuesday, CNN-IBN has found that it is unemployment and stunted industrial and agricultural growth in the state that is forcing people to invest in ponzi schemes.

Seventy-year-old Sunil Sarkar recounts how he found his son Jayanta Sarkar's body at the terrace hanging by a rope. Jayanta, who was allegedly murdered, was one of the owners of Hello India Express Ltd, a fund that went bust. His partner Indrojit Roy committed suicide the next day. His family says it was all a fallout of the Saradha chit fund bust.

Jayanta's wife Papiya Sarkar said, "It's all because of Saradha, there was a panic in the market since January since the employees of Saradha weren't getting paid. Investors were panicking and the collection was shrinking."

Chit funds have long functioned in Bengal. It's a system that thrives mostly on small depositors from rural areas with abysmal banking facilities and financial illiteracy. The RBI says Bengal ranks among the states with the lowest financial inclusion.

But there are deeper problems. Stunted industrial and agricultural growth over the years in Bengal leading to unemployment and income inequality are factors that have spurred the rise of illegal deposit companies, now a major source of employment and quick money.

Economist Dipankar Dasgupta said, "It is possible to do such things in a locality, which is poor, which is hoping that better days will come and come soon and they have been waiting and waiting, and then an opportunity comes that in the next six months I will double your money. Many people fall prey to that."

Meanwhile, West Bengal Chief Minister Mamata Banerjee has announced the social security scheme targetting small depositors where people can save money with the government instead of opting for dubious financial offers. But questions remain if she would she be able keep the interest rates higher than banks and post offices and if she does, how will she get the money when the state is already debt stressed.