The Telegraph
Saturday , August 30 , 2014
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See-no-Saradha minister
Red flags that Amit Mitra missed

Calcutta, Aug. 29: Chief minister Mamata Banerjee today wondered aloud during a television interview while referring to the Saradha scandal: “If the Sebi and the RBI do not inform, how do we get to know?”

Not at all, chief minister, someone brighter, sharper and smarter than both the Sebi and the RBI could have informed you.

He usually occupies the seat right next to you and he answers to the name Amit Mitra, the finance and industries minister of Bengal.

Not one but at least four red flags had fluttered in front of Mitra between 2011 and 2012 that should have alerted him to the cash-collection scandal that was in the making.

The year 2011 resonates with significance, not just because the 34-year rule of the Left ended in Bengal but also because it heralded the “golden age” of Saradha. (See chart)

Red flag I

Year: 2012

Date: September 25, 2012 (eight months before Saradha collapsed)

Event: The 119th State Level Bankers’ Committee (SLBC) meeting

Present: Finance minister Amit Mitra; then SLBC chairman and United Bank of India chief Bhaskar Sen and several others

Consider an entry in the minutes of the meeting: “He (Sen) specially mentioned about the feedback received from the rural branches that certain non-banking entities are mobilising deposits from the rural masses citing unrealistic promises in respect of future return…. He emphasised on the need for putting in place a safe net to protect the interest of small savers.”

A bank official present at the meeting recalled today that Mitra had delivered his speech immediately after Sen’s welcome address. “The minister spoke of the need to work on the Kisan Credit Card, financial inclusion, crop insurance etc. He did not say anything on the ponzy (unrealistically high returns) schemes,” the official said.

It is not clear whether Mitra, after he returned from the meeting, had drawn Mamata’s attention to what Sen had red-flagged or whether the finance minister recommended remedial measures to the chief minister.

The chief minister has been saying she became aware of the crisis only after Poila Baisakh last year (April 14, 2013).

The Telegraph tried this evening to verify with Mitra whether the minutes of the meeting were authentic and how he had responded then. An aide who took the first call disconnected the line as soon as he heard the newspaper’s name. Called a second time, the aide said the minister was busy and would get back. Till midnight, there was no response.

Red flag II

Years: 2011 and 2012 (Saradha’s golden age)

Place: The finance minister’s table

Mitra need not go to banking conferences to find out what is happening in his financial backyard. He is the most powerful financial authority in the state and information flows to him regularly without fail.

The small savings directorate places on the finance minister’s table data that no finance minister of Bengal, a state once known for high volume of small savings, can afford to ignore.

The data in 2011-12 (Mitra’s first year and office) and 2012-13 (by when Trinamul was well entrenched in power) were deafening. Net small savings deposits (the amount left after withdrawals) had turned negative in 2011-12, meaning collections were less than withdrawals.

A year before in 2010-11 (the last financial year of the Left regime), net small savings deposits in Bengal had accounted for Rs 8,300 crore. (See chart)

Why such a yawning gap did not prompt the government to press the panic button only Mitra can answer.

“This is something which cannot escape the eyes of a finance minister as better collection leaves open a window for the state to avail itself of loans on easy terms. The finance minister of a cash-strapped state cannot overlook the situation,” said an official.

Now the Enforcement Directorate has dug up damning data: the years 2011-12 and 2012-13, when the net small saving deposits turned negative, were also the time when Saradha’s collections skyrocketed. Saradha’s funds collection doubled to Rs 1,008 crore in 2011-12 and it scooped up as much as Rs 806 crore the following year.

Red flag III

Period: December 2011 to December 2012

Place: The finance department under Mitra

Three letters were sent by the directorate of small savings to its parent, the finance department, according to sources. The letters were sent between December 2011 and 2012, the peak years for Saradha.

The letters sought to warn the finance department that illegal deposit-mobilising companies had grabbed a big chunk of the small-savings pie with the help of state-appointed agents, officials said.

“The directorate mentioned that the majority of the 33,000 state-appointed agents, who are supposed to collect small savings deposits, were encouraging the rural populace to put money in illegal deposit mobilising companies,” said a finance department official.

Red flag IV

Year: 2011

Place: Finance department

Veteran officials said Mitra had a chance to be aware of the threat as soon as he took oath as a minister.

In 2010, the then Left Front government had written a letter to the Sebi mentioning the name of Saradha. The Left government had wanted an inquiry against the deposit mobilising company, said an official.

“A copy of the letter was definitely in the files kept in the finance department. The file must have been placed before Mitra, who should have carried the process forward as parties in power change but the government remains,” said a retired IAS officer.

No doubt, the Sebi and the RBI were snoring. But what about the finance minister, CM?