Chit Fund Scam in West Bengal-after effect

India Post sees steady rise in small savings after chit fund debacle

KOLKATA: India Post, the government department that is seeking a banking license, is flooded with small savings in West Bengal after investors lost hundreds of crores in Ponzi schemes, giving it a stamp of approval from the masses ahead of the regulator.

The department has amassed a net of Rs 560 crore of deposits in the first three months of this fiscal, a period which is normally considered as a dull one in terms of savings. For the entire last fiscal, total net mobilisation was Rs 1,789 crore, West Bengal's chief postmaster general J Panda said Tuesday in Kolkata.

"Inflows of funds has been steady now," Panda said. This has coincided with the collapse of several Ponzi scheme companies in West Bengal.

The growth in mobilisation of small savings had slowed in the last three financial years to March 2013 when money circulating companies flourished in the state luring lakhs of small depositors with a prospect of making quick fortune.

India Post officials in Kolkata played down the Ponzi scheme effect on mobilisation. "The growth in generation of small savings reached a plateau with the availability of alternate investment options available in then market," postmaster general for Kolkata S Das said. "Seniors, who are traditionally the biggest takers of the postal savings schemes, are largely lured to other options."

The postal department in Bengal mobilised a gross Rs 23,872 crore in 2012-13 compared with Rs 23,571 in the preceding fiscal, reflecting a flat growth.

The Ponzi scheme debacle begun somewhat around last week of March when Saradha Group, which raised several thousand crores in fixed deposits and collective investment schemes, issued closure notices on many of its newspapers and TV channels following to an apparent financial crunch. This was followed by a run on the Saradha's chit fund business after anxious depositors flocked the counters with early redemption request. Several other such companies met the same fate.

The banking circle said that the lack of financial penetration in the state had allowed sham schemes to grow freely. The renewed interest on small savings is again driving home the point that while banks failed to build infrastructure to reach out to the country's remotest parts, India Post with over 1.5 lakh offices is perhaps the best suited for getting a banking license.

The country has close to 84,000 bank branches with 34,000 of these in the rural areas. While about 90% of India Post's offices are in the rural belt.

"We are giving emphasis on networking village post offices to enable savings customers to withdraw money anywhere in the country," Panda said at an event organised by MCC Chamber of Commerce & Industry.

Source : http://economictimes.indiatimes.com