Saradha scam: Why Rs 500cr relief fund won't be sufficient

It may pale in comparison to the figure involved in the Sahara OFCD case, but the Saradha chit fund scam may run into a lot more than what Mamata Banerjee is provisioning for.

While the West Bengal chief minister is creating Rs 500 crore relief fund for chit fund investors, CNBC-TV18's Sajeet Manghat and Ashmit Kumar report that the state may need more than double that number to reach all affected investors. The Saradha chit fund scam is turning into a nightmare for the Trinamool Congerss (TMC) and the Congress. While Mamata Banerjee blames the government for lapses, she may not be able to wish the controversy away. The Bengal CM will need to explain why her government turned a blind eye to the happenings at Saradha group after the director, of the economic offences investigation cell of the state alerted Securities and Exchange Board of India (Sebi) about the compnay in April 2010. Post investigation, Sebi issued a show cause notice to the company in December 2011. The regulator estimates that Saradha Realty may have raised in excess of Rs 1000 crore from investors under various real estate schemes. Sebi says, Saradha realty used a chain marketing system to sell its schemes to the public at large. During the quasi-judicial process that went on for little over two years since the show cause notice, Sudipta Sen the promoter of the company and its directors were not able to submit details on the investors or money raised. This was to such an extent that towards the end of its hearing, the company claimed fraud by its brokers in creating false and dummy codes, and non-availability of the data. While Mamata Banerjee blames the central government for the non-regulation of chit funds and the subsequent loss to thousands of investors, the central government says that in 2012, it had sent out a model code for the regulation of chit funds to all state governments. However, no state government responded with its views on this code, nor was any of it adopted or implemented in any fashion.