u***r
发帖数: 4825 | 1 http://www.bloomberg.com/news/2014-01-06/india-savings-deposit-
By Yoolim Lee Jan 6, 2014 4:00 PM CT 44 Comments Email Print
Facebook
Twitter
Google+
LinkedIn
Save
Photographer: Ashok Nath Dey/Getty Images
Investors in Sudipta Sen's Saradha companies protest in Kolkata as word of
the scam... Read More
Sudipta Sen was on the run when police arrested him on April 23 at Hotel
Snow Land, a resort with views of the Himalayas in Sonamarg, India, about 2,
700 kilometers northwest of his Kolkata base.
Sen’s Saradha Realty India Ltd., the anchor of an empire that took in small
deposits and promised payouts of land, apartments or a refund of clients’
money with interest rates as high as 24 percent, was defaulting on thousands
of deals. Employees of Sen’s media companies hadn’t gotten paychecks in
months. As cash dried up, 1.74 million customers saw savings vanish,
Bloomberg Markets magazine will report in its February issue.
The upheaval didn’t end with Saradha. Panicked depositors rushed to pull
money from similar companies. Since April, more than 34 people have
committed suicide, 13 of them Saradha agents and investors. A 50-year-old
domestic helper south of Kolkata in Baruipur, one of many hubs of Sen’s
activities, set herself ablaze after losing 30,000 rupees ($482).
Saradha Group, the parent of Saradha Realty, was among hundreds of
unlicensed deposit-taking enterprises that serve India’s poor -- and skirt
regulators.
Clients scraped up as little as 100 rupees a month in a country where the
World Bank’s Global Financial Inclusion Database found just 35 percent of
adults had a bank account and 8 percent borrowed through formal channels in
2011.
Photographer: Subhankar Chakraborty/Getty Images
Sudpita Sen has been jailed since his arrest in April. A special court may
be set up to... Read More
Goat Farmers
India requires such quasi-banks to register with state or federal
authorities. Many don’t. Saradha and others avoid oversight by disguising
themselves as real estate developers, goat farmers and emu raisers, says U.K
. Sinha, chairman of the Securities and Exchange Board of India, the nation
’s capital markets regulator, known as SEBI.
Sen, chairman and managing director of Saradha Group, said he owned 160
companies. About 15 operated as real firms, Sen’s lawyer Samir Das says.
Unlawful deposit companies proliferate in India. Saradha took in at least $
200 million based on preliminary figures, Sinha says. Actual numbers may be
bigger, he says. Such firms have raised a total of more than $2 billion,
Sinha estimates.
Sen has been jailed since his arrest. Police have filed 155 charge sheets,
formal documents of accusation, against Sen, Das says. Sivaji Ghosh,
additional director general of the West Bengal police’s criminal
investigation department, said in mid-December he expects a special court
that will handle all Saradha-related cases to be set up soon.
Saradha Group Chairman and Managing Director Sudipta Sen was arrested on
April 23 as... Read More
Saradha Fallout
What makes Saradha’s collapse noteworthy is the turmoil it spread across
six states, a territory the size of Spain in eastern India, where access to
banks is limited.
Depositors protested and mobs ganged up on agents. Abhimanyu Nayak, who
worked for another unregistered collection firm called Seashore Group,
jumped in front of a train in Odisha state in May as investors hounded him
for their cash.
Saradha and its aftermath hurt so many people that the government had to
step in, says Pratip Kar, who served as SEBI’s executive director from 1992
to 2006 and now works as a World Bank consultant.
“Ponzi schemes like Saradha create widespread havoc, like a tsunami,” says
Kar, describing ploys in which companies repay depositors with money from
new investors. “When the shopkeeper and the household helper and the
rickshaw pullers are robbed of their minuscule savings, it is painful.”
New Powers
The Saradha fiasco sparked an overhaul of SEBI’s powers. The regulator has
shut 15 companies and barred the owners from the capital markets. It’s
investigating 20 more, Sinha says.
That’s a fraction of India’s fraudulent collection businesses, says
Prithvi Haldea, chairman of researcher Prime Database in New Delhi.
“There are countless scams currently in operation in various sizes, shapes
and forms,” he says. “Saradha led to a new law and that’s a good thing,
but is it geared toward conquering all scams? Certainly not.”
In India, several regulators supervise banks and financial companies --
creating gaps that scammers exploit. SEBI monitors so-called collective
investment schemes, known as CISs, which typically deal with money pooled
from customers.
SEBI, which had power to investigate but not enforce, can now search and
seize property and recover wrongful gains, Sinha says. The government can
also classify pools of more than 1 billion rupees as CISs and put them under
SEBI’s purview. In the past, no threshold existed.
‘Nothing Escapes’
As for smaller scams outside SEBI’s radar, Sinha says, some states have
passed a measure to protect depositors against unauthorized money raising.
SEBI will share information with states, the corporate affairs ministry and
the Reserve Bank of India to help fight fraud.
“We want to ensure nothing escapes,” Sinha says.
The reforms don’t go far enough, says Satyajit Das, author of a dozen books
on financial risk, including “Extreme Money: Masters of the Universe and
the Cult of Risk.”
“The regulatory infrastructure doesn’t actually keep up with reality,” he
says, adding that scammers will simply create dozens of small companies to
avoid the 1 billion rupee threshold.
“The authorities need to accept that in the modern financial system, these
quaint distinctions between banks, nonbanks and CISs are a complete waste of
time,” he says. Das says India needs one powerful financial regulator.
Ajay Shah, an economist at the National Institute of Public Finance and
Policy in New Delhi, says hasty laws may not address the scope of a
malfeasance.
‘Ponzi Schemes’
“Laws are enacted as a knee-jerk response to an event and often poorly
thought through,” he says, commenting about the government’s reactions to
financial scandals. “Ponzi schemes like Saradha are a visible sign that the
government’s strategy is fundamentally broken.”
Lax law enforcement and India’s slow judicial system aid fraudulent
companies, says Prime Database’s Haldea, who is also an investor-protection
activist with a website listing economic offenders.
“People assume that they will never be caught or will get off lightly,” he
says. “Ultimately, the fear of law has to go down the throats of
fraudsters.”
Financial scams are hurting India as it battles an economic slump. The
central bank predicts growth will remain at 5 percent in the 12 months
ending on March 31, the same pace as in the previous fiscal year and the
slowest growth in a decade.
Undermining Confidence
Harm to small investors undermines confidence in the financial system. When
Indians lose cash, they put money into physical assets such as gold, which
India imports, Shah says. That reduces household capital that powers the
economy.
India raised the tax on gold imports three times in 2013 to curb demand and
tackle a record $87.8 billion current-account deficit that weakened the
rupee in August to an all-time low of 68.845 to the dollar.
“Beyond the actual dollars lost, these Ponzi schemes contaminate people’s
confidence, and the financial markets become weak,” Shah says. “To have a
comprehensive, vibrant economy, you need to have households that have
confidence in an array of financial institutions and products, whether it’s
a bank or mutual funds.”
Tuku Biswas lost her life savings to Saradha. Biswas, a sex worker in
Kolkata’s Sonagachi neighborhood of multistory brothels, was 28 in 2012,
when she discovered she had the HIV virus.
‘Sister’s Future’
Determined to support her 11-year-old sister, Biswas deposited 7,500 rupees
a month with Sen’s Saradha Tours & Travels Pvt. Biswas expected a lump sum
of 131,250 rupees -- including the promised 17 percent interest -- by August
2013. When Saradha imploded in April, she got nothing.
“That money was my sister’s future,” she says. “All I want is my money
back. I don’t know how long I have left to live.”
Saradha lured clients with an array of pitches. Saradha Realty took cash as
an advance for properties that the company didn’t identify at the outset,
according to an April 23 statement from SEBI.
Investors chose land, an apartment or a refund of their money with average
interest of 12 to 24 percent at the end of the agreement. Saradha also took
as little as 100 rupees a month for 12 to 60 months. Some investors put in
10,000 to 100,000 rupees for 15 to 120 months or lump sums for 12 to 168
months.
Sen documented his own downfall in an April 6 letter to India’s Central
Bureau of Investigation, four days before he fled Kolkata.
‘Women, Wine’
He said he made a costly foray into the media industry by acquiring
television channels and newspapers in 2011. Close aides kept a major chunk
of depositors’ money, he wrote. And marketing officials who recruited
agents were illiterate, he said.
“They only understood money, women and wine,” Sen wrote.
Sen described his aspirations in the letter. “I never thought about my
limitations,” he wrote.
“A few of my well-wishers cautioned that it is not possible to organize a
big empire. But I did not hear anyone’s advice.”
Starting as a property agent in the 1990s, Sen became the owner of Saradha
Construction Co. in West Bengal, according to local newspapers.
In July 2008, he established Saradha Realty as his deposit-taking business,
hiring thousands of agents in four months. Saradha paid them about 30
percent of the cash they brought in -- sparking a stampede for customers.
SEBI began questioning Sen’s business in 2010. He went on a takeover spree,
his letter and corporate filings show.
Bogus Factory
He bought debt-ridden motorcycle assembler Global Automobiles Pvt. and kept
150 employees on the payroll, who pretended to work when people visited. The
factory never produced a single motorcycle, former employee Lakhinder Ram
says.
Sen denied to SEBI that he was running a collective investment scheme. He
handed over 63 cartons of irrelevant information in 2012 to delay the
regulator, according to SEBI’s statement.
In an April 1 letter, Sen again denied Saradha was running CISs, saying he
was receiving money from sales and advance bookings with the help of brokers
-- a claim SEBI rejected.
Sen was with two associates when he was arrested in April, including Debjani
Mukherjee, who joined Saradha Tours in 2008 and by 2011 was a director of
38 companies. As of early December, clients and employees had filed 390 so-
called first information reports against Sen and his aides to police, which
set criminal investigations in motion.
As officials dissect Sen’s enterprise aided by expanded powers, economist
Shah says the lesson for India must extend beyond Saradha.
“Our entire approach to financial regulations today is completely wrong
because it hurts the people and the economy,” he says.
To contact the reporter on this story: Yoolim Lee in Singapore at yoolim@
bloomberg.net
To contact the editor responsible for this story: Michael Serrill at
m******[email protected] |
|
