Rose Valley Case, A Chit Fund Scam
Post on 14,March 2017   2:00 AM
By - PolyEyes Staff
views 314
Bookmark and Share

Two of the party’s big leaders — Tapas Pal and Sudip Bandyopadhyay from All India Trinamool Congress (TMC) party — allegedly linked to the Rose Valley scam were recently arrested by the CBI.

Rose valley case: It is a chit fund scam where two entities Rose Valley Real Estates and Constructions and Rose Valley Hotels and Entertainment, managed to pool in Rs 18000 crores from investors as installments for property purchases promising extraordinary returns of 21%.

Rose Valley, as per the ED estimates reportedly collected more than Rs. 15,000 crore from depositors across India, especially west Bengal, Assam and Bihar

In March 2015, the ED arrested group’s chairman Gautam Kundu after interrogation at his salt lake office in Kolkata, however the all India small depositors association pegs the amount at close to Rs 40,000 crore - 16 times the size of the Saradha scam huge amounts were allegedly siphoned off and transferred to other accounts

Rose Valley hotels & entertainment reportedly owns nearly 23 properties across India

SEBI had prohibited the sale of real estate by Rose Valley in January 2011 and the state government had followed suit.

There are as many as 30 companies under the Rose Valley banner on paper, which includes companies such as Rose Valley Airlines, Rose Valley Microfinance, Rose Valley Fashion, Rose Valley Consultancy, Rose Valley Beverages, Rose Valley Infotech and Rose Valley Housing Finance, chairman also became a corporate agent of the LIC

Attracted to the false promise of high returns, unsuspecting people kept pouring in money, often their lives' savings, into such schemes.

Rose Valley was having a smooth run until 2012, when IRDAI raised objections on the way company was being operated

Other fraudulent monetary schemes:

Chit Funds: A chit fund is a type of saving scheme run by an individual or an institution.

Subscribers pool instalments to the chit fund. After a period, each subscriber gets the entire pooled fund after a discount cut by the chit fund.

The benefit of chit fund is that a subscriber can get a large amount of money in a short time.

As per Supreme Court, Chit funds are a part of concurrent list, Chit funds are registered by the State governments. The unregistered ones are usually termed illegal.

The Prize chits and Money Circulation (Banning) Act 1978 usually defines the illegal Chit funds.

Ponzi scheme: It is an illegal investing scam promising high rates of return to investors.

It has no underlying assets i.e. it generates returns for older investors by acquiring new investors and not by earning returns/revenue by any assets like property etc.

Pyramid Scheme: It is an illegal scheme similar to Ponzi scheme.

While in a Ponzi scheme, participants believe of earning returns from any asset, participants in a pyramid scheme are aware that they earn money by finding new investors.

Reasons of such scams

 

  • Quick-get-rich attitude and greed in a consumeristic society. Shortcuts to being rich.
  • Multiplicity of regulations and confusion over jurisdiction.
  • E.g. Centre and State regulate chit funds whereas SEBI regulates other collective investment schemes.
  • Low financial literacy in the investorsabout such schemes.
  • Less paper work and least of the documents is required Poor regulation.

 

Steps taken by the government

 

  • Collective Investment Schemes regulationgives SEBI sweeping powers to oversee all such schemes that pool investor money.
  • RBI has advised banks to carry out quick reviews of accounts opened in the names such as market agencies and retail traders.
  • RBI has been sensitizing state governments on the Prize Chits and Money Circulation Scheme (Banning) Act, 1978and the appropriate action needed.
  • ‘Direct Selling Guidelines 2016’by SEBI clearly definesmoney circulation schemesand direct selling to help investigating agencies identify fraudulent players.

 

Direct Selling and Money Circulation guidelines 2016

 

  • Regulated by Department of consumer affairs.
  • It bars entities involved from charging any entry fee from agents.
  • It has also made certain formalities for appointment of monitoring authority at central and state level to deal with such money circulation schemes.
  • It prohibits such entities from using misleading and deceptive or unfair recruitment practices.

 

Conclusion: The basic aim of such saving and investment schemes is to dupe investors fraudulently. Therefore there is a need to resolve both the supply side problems like regulation deficit etc. along with demand side problems like poor awareness, to curb the financial losses to the economy due to these schemes.


Back
Comments ( 0 )
Add a comment
Your name: *
E-mail:
The content of this field is kept private and will not be shown publicly.
Title:


Related Articles

Prelims Online Test Series
UPSC 2017 Prelims Test Series Registration Link

UPSC REGISTRATION
JPSC 2017-18 PRELIMS Test Series

REGISTRATION
Most Recent Comments

sir,your prediction about cut off for general(85-95) is on the basis of 9000 results or more than that.further there is 35% horizontal reservation to women.please clarify

by Pushkar Verma
Surprisingly individual friendly site. Great info available on couple of gos to.
by Binary Option Trading Systems

sir please do reply on the above comment.also tell about the expected date for main exam

by Pushkar Verma

Sir ,

Due to�previous records of jpsc ....can u tell there were any possibilities that jpsc conduct 

7th jpsc as on 12 nov 2017....can  we prepare for it

by Ridhima

Yes gear up , early starters alwaz has edge.

by Help Desk PolyEyes

Proud to be a Bihari

by S K Rai

i have scored 91 as per the answer keys ,any chance for mains genral category

by Karunendra

sir ,

i am scoring 90 according to bpsc answer key.i belong to gen category . i have challenged 5 questions(LPG,KING KHARWELA,UNFCCC,PARTICULATE MATTER,AND SEAT OF AN MP).please tell me whether i should focus on mains.this is because upsc pre is scheduled on 18 june and currently facing dilemma regarding allocation of time.please reply as it will be helpful during last hours of preparation

by Pushkar Verma
Get RSS Feeds
  • All Stories
  • Recently Published Stories
  • Most Viewed Stories
  • Just In Photos
  • Most Viewed Photos