The Hindu : Kerala / Kochi News : A vigilante group against `blade companies'

Online edition of India's National Newspaper
Tuesday, Jan 10, 2006

Kerala

Kerala - Kochi

A vigilante group against `blade companies'

K.P.M. Basheer

KOCHI: To keep an eye on the double-your-income-in-a-year savings companies and fly-by-night chit funds, a small-investors' vigilante group has been formed at Kolencherry in Ernakulam district.

Its units will be opened in other places depending on the support from the public, A.P. Mathai, co-coordinator of the State-level Investors and Filed Workers' Collective, said here on Friday.

Such an organisation was long overdue in Kerala, which is home to thousands of dubious financial institutions (collectively known as `blade companies') that thrive on small investors' humble savings. Many of them had failed and many others had vanished overnight, pocketing millions of rupees of working class and middle class people who had saved rupee-by-rupee to marry off a daughter or to send a son to college.

"Several thousands of people lost their lifetime savings when Himalaya, Integrated Finance, Sat Bank and Sudarsan Chits failed or vanished," he pointed out. He regrets that people have not learnt their lessons from these experiences. Mr. Mathai, who is also member of the Vadavukode block panchayat, told The Hindu that the collective was spurred by the recent disappearance of a Kolencherry-based financial firm that had opened 22 branches in Kerala and one in Tamil Nadu in a few years. The firm, set up by a former part-time journalist who is now behind bars, had employed about 500 women as field workers to canvass deposits. Each of these women used to collect around Rs.3,000 a day. Now that the company has folded, these canvassers are facing the wrath of the depositors. Small wonder, many of the field workers are members of the new organisation— and hence the name.

Well, what is the organisation planning to do to protect the investors' interests?

"We are planning to press the Government to lay down strict rules for the finance companies to comply with before setting up shop," Mr. Mathai said. The collective would move the High Court with a public interest petition seeking to ask the Government to formulate guidelines for these companies.

"One of the guidelines the collective would like to suggest is that each finance firm should get an approval from the panchayat or municipality before it opens an office in a village or town. It should also inform the local police station beforehand." Government agencies should devise some mechanism to assess the asset base of the promoter and there should be a ceiling on accepting deposits in relation to the assets.

The collective recently organised a seminar in Kochi to highlight the frauds committed by the finance companies in Kerala's villages and small towns. By end-January, a meeting of `victims' of financial companies will be held at Kolencherry.

The organisation is planning to widen its membership and activities by asking victims of finance firms to sign up. It would also work to help those who had borrowed money from such firms. Mr. Mathai said that `blade companies' had `robbed' thousands of people in the State, seized their properties and homes. Many borrowers from the blade companies have committed suicide. "This must end," Mr. Mathai said.

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