The Manipur cabinet recently decided to set up the Banning of Unregulated Deposit Schemes (BUDS) cell in the directorate of Institutional Finance. 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 recently arrested. A small-time fraud Salam Bijen alias Salam Boyai from Naransena Awang Leikai of Bishnupur district was also arrested recently. He went into hiding after allegedly scamming clients with promises of providing loans and collecting more than Rs 1 crore. But the interesting question is, 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. However, investing in a microfinance company is just like gambling.
The state government had long been non-committal towards the plight of investors of the unregulated private banks or financial institutions who were left high and dry. That the state government knew about the private banks or unlicensed financial institutions operating in the state cannot be denied as these institutions advertised in the open thereby collecting deposits or investments, whatsoever one chose to call it, on high interest rates. There were so many ‘investors’ from those with chunks of retirement benefits and not so legitimate persons with black money. These people might not pose problems for them, but it is a great headache for those small investors with hard earned money and savings who are out to eke out a respectable income from the high interest rates to pay for education of their children and other domestic expenditures.
But when the dam bursts open, these small-time investors are painted as gullible people. But the state government recently woke up and decided to set up the BUDS cell. As the cell would have a dedicated Joint Director, he or she can begin by going through the books of all such unregulated private banking institutions. As the saying goes, it is better late than never.
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.
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.