Calcutta, Jan. 24: Former finance minister Asim Dasgupta today warned of an impending crisis in the state because of an unprecedented rise in mobilisation of deposits by chit funds, willy nilly holding the Trinamul government responsible for pushing small savers towards a bubble that may burst.
“The chit funds that are mobilising money now will start facing repayment obligation after a few years… A crisis is awaiting as the model is unsustainable,” Dasgupta told a news conference this afternoon.
The growth of chit funds — sources said the number may not be less than 3,000 — in the state has become a political hot potato for the Mamata Banerjee government as the Opposition has blamed the ruling party for the mushrooming of these entities, which promise high returns to depositors.
Depositors are either promised high rates of interest — at times around 30 to 40 per cent a year — on their deposit or different varieties of assets like land or property at attractive places at a future date.
Sources in the state finance department said the annual collections by the chit fund companies would not be less than Rs 15,000 crore.
“The deposit mobilisation under the small savings schemes has plummeted primarily because of the chit funds,” a government source said.
Dasgupta, however, did not hold the chit funds alone responsible for the dip in small savings collections. He criticised recent moves of the Centre, such as discontinuing the Kisan Vikas Patra, cutting back on commissions for agents and withdrawing tax exemption benefits from some schemes.
“But there is no doubt that chit fund companies are growing in the state,” he added.
Economists have always cautioned people to steer clear of these companies, which come under the purview of Sebi or RBI, as the returns promised by these entities are unreal. There have been several instances of these companies going bust or shutting shop after making repayments in the initial days to lure more depositors.
“In the last few years of the Left government, we, along with Sebi and RBI, had started investigations into the operations of these companies and got a lot of details about them. We want to know what the present government is doing about these companies,” Dasgupta said.
According to him, the Left government had drafted a bill in 2003 to crack down on the chit funds. The bill is yet to get presidential assent. “Is the state government actively pursuing the matter with the Centre?” Dasgupta asked.
Both the Left and the Congress have been demanding that the government act against chit funds, many of which have diverse business interests such as in hospitality and the media. But the government is yet to take any concrete action.
Attempts by the Left parties to move a motion on chit funds in the Assembly was turned down recently. Some senior ministers, including urban development minister Firhad Hakim, have often blamed the Left Front regime for the growth of chit funds.
“In the 1990s, we had taken action against several chit fund companies and that prompted others to shut shop…. When these companies again sprang up from early 2000, we had tried to bring the legislation. Even though the legislation got stuck, we tried our best to crack down on these companies. Now, it is time for this government to act,” Dasgupta said.