The Hindu : Andhra Pradesh News : Unsuspecting depositors continue to grope in dark Law & Order

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Saturday, Oct 18, 2008
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Andhra Pradesh

Andhra Pradesh

Unsuspecting depositors continue to grope in dark Law & Order

Despite the unearthing of several financial frauds, depositors do not seem to have learnt any lesson, writes Marri Ramu

It is a simple modus operandi. Lure depositors by offering high rate of interest, misappropriate the money collected in this way and disappear.

From innumerable chit fund fraud cases to the sensational Krushi Bank scam to the recent alleged fraud in Telegraphic Traffic Employees Cooperative Credit Society, tricksters have adopted this method to knock off crores of rupees belonging to unsuspec ting investors. Still, frauds by key persons in financial firms - cooperative urban banks, chit funds and cooperative societies - continue to be reported.

No lessons learnt

However, neither the depositors nor the Government wings concerned seem to have learnt any lessons from the past experiences.

Unlike other crimes, law-enforcing agencies can play only a small role in solving frauds by financial firms because they are already overburdened with regular law and order issues.

Financial analysts repeatedly advise that depositing money in public sector banks or fully-Government owned institutions is safe. Risk is high if money is invested in private firms though they are registered. Persuasion by colleagues, relatives and known persons and the bait of high interest rate are the common factors that drive people to deposit their life-time earnings and retirement benefits in firms not having strong financial base.

Dicey affair

Police officers say people should keep in mind that depositing money is a few minutes’ job but getting it back in case of a scam would take years. One is forced to spend further time and money by moving around police stations, courts and advocates. The agonising experiences of Krushi and Charminar Bank depositors stand as examples. Hence, always prefer public sector banks to private organisations for security of money unless the latter have an exceptional track record.

Fortunately, the compulsory insuring of deposits of Rs 1 lakh and lesser amounts by private banks has come as a big relief for small investors.

Paradoxically, no such mandatory insurance to protect interest of small depositors is followed by cooperative credit societies. As a result, scores of people who deposited money in the Telegraphic Society stand to lose their hard earned money.

Police maintain that cooperative societies should not accept deposits from persons other than their members and get their accounts by the co-operative authorities periodically audited. Interestingly, nearly Rs. 20 crore, of the Rs. 26 crore deposits of the society, is from non-members.

The accused managed to hoodwink the audit officials, create fake records and misappropriate the money. Investigators feel that instead of taking up the Telegraphic Society as yet another routine case, the Government should thoroughly examine it and introduce changes in the law to safeguard interests of depositors and secure punishment to the fraudsters.

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