The recent notification by Manipur Finance Department cautioning people not to fall prey to unregulated financial scheme (cash based) by some unscrupulous group of money lenders and others in various sections of the society in Manipur brings into focus how members of the public are still being duped by these smooth talkers with high sounding titles in branded suits.
And the victims are individuals/small businesses/small and marginal farmers. The notification by Director, Institutional Finance Manipur said that these unscrupulous groups of money lenders and others are luring people with the promise of getting loans in a quick and hassle free manner. However, these have led to exploitation due to excessive rates of interest and additional hidden charges being demanded from borrowers and several small and marginal farmers have lost their lands or mortgages due to unfair and unsecure financial schemes, the notification added.
In view of such activities, the state cabinet recently decided to set up Banning of Unregulated Deposit Schemes (BUDS) cell in the directorate. It is indeed a welcome move, as there are several cases of loss of huge amounts of money among the general public who were lured into depositing money with the promise of high interest rates by unregulated or unauthorised private banks.
Problem is there are hundreds like him and gullible people continue to fall prey to such frauds. In the late 70s and 80s, a private bank named Satna Bank ran such a scam and went missing after collecting a huge amount of money. This is still going on in many corners of the state. The general trend is to form a joint action committee after the so-called MDs went missing. Some are caught and others are still in the radar.
Salai Group of Companies was the first to break up and now thousands are suffering because of the loss of their savings in these institutions. Next came the Lamjingba Groups of Companies whose MD Sanasam Jacky was arrested. But the interesting question, who are the clients? Obviously, they are mostly people looking for easily available loans or high interest rates.
Why majority of the investors in the state choose private banks over nationalised banks. It is simply because the rate of interest is much higher compared to government banks. In the loan section, people opt for private banks as they provide easy loans though interest rates are high. The main reason for private banks booming in the state leaving nationalised banks behind, is because of easy accessibility, high interest rate, not having to disclose the source of funds and evading from paying tax.
On the other hand, a lot of borrowing still takes place from private lenders, who charge exorbitant interest rates. Despite the high interest rates, borrowers are willing to pay the higher rates rather than go through the extremely cumbersome process of getting a loan from formal financial institutions, especially from banks, she said. Nowadays, other financial entities have made availing loans easier.
However, these loans are limited as most of them can lend only to its members under the prevailing guidelines or rules. In this backdrop, it becomes relevant that the general public is given more awareness about the benefits of availing credit from formal financial institutions. Yet, these formal financial institutions and banks need to open up and ease the regulations. Cautioning the general public about such frauds is alright.
But, the government needs to do more than that. Educating on the benefits of the formal banking sector is an important thing. Next, a reform on accessibility, customer services and interest rates is needed. Another important task would be the establishment of an intelligence agency to monitor these unregulated banks and lending agencies.