`Blade firms' draw depositors' blood in Kerala

`Blade firms' draw depositors' blood in Kerala
LEELA MENON

KOCHI, MARCH 15: Dubious financial institutions dubbed "blade companies" because of the exorbitant interest charged by them, continue to be the instruments of death across Kerala. Family suicides hastened by financial problems are everyday occurrence here.

A survey undertaken by the Akhila Kerala Blade Nirmoolana Munnani(AKBNM) in seven districts of Kerala reveals alarming figures showing Ernakulam as the most vulnerable to the blade seduction. In Ernakulam, 13,500 depositors lost Rs 22 crore in 1999. The figure was 14,600 and the amount was Rs 17 crore in 1997 proving that the vicious social evil is steadily on the increase.

In Thiruvananthapuram, 9,100 depositors were cheated of Rs 11 crore in 1999. The figure was 8,500 and Rs 6.5 crore in 1996. In Idukki, 2,250 depositors were cheated of Rs 2.5 crore, in Wynad 17,00 depositors lost Rs 8.2 crore, in Kozhikode 17,000 depositors lost Rs 9.5 crore and in Kannur 8,100 depositors lost Rs 5.5 crore. In Kasargod the figure is 6,500 and Rs 3.5 crore.

These figures do not include those who borrow at killer rates of interest, courting suicide as the only option when they fail to repay.

The survey undertaken by professors, advocates and retired Army officers also found that depositors are mostly poor female workers and petty business people who work on daily wages such as casual labourers, fish vendors, auto taxi drivers. They deposit their small earnings with such financial institutions hoping to buy a house someday or for their kids' marriage.

The survey also found that quite a few of the depositors committed suicide, unable to bear the loss. Several leave town unable to pay back borrowed amounts.

Neither the Government nor the people's representatives have initiated any effective measures either to streamline their management or cushion their murderous impact on the populace.

The AKBNM alleges that this apathy on the part of the authorities is because of their nexus with political parties in Kerala. Blade companies seduce naive customers like pensioners into depositing their life's savings in their companies with promises of steady flow of income only to vanish without a trace one fine morning with the owners absconding with their precious savings.

"Why cannot Kerala Government adopt provisions of Indian Chit Fund Act 1982 and Investors Interest Protection (Financial Institutions) Act 1997 which have been adopted by other States?," asks Major Kamban, general secretary of the AKBNM.

In a memorandum to the Kerala Governor, enclosing the disheartening statistics unearthed by the survey, Major Kamban said this particular crime is patronised not only by the elites of society, but both political fronts because they were getting campaign and personal funds from them. "The Kerala Small Financiers Association (KSSFA) from Thrissur contributed nearly Rs 13 crore to various political parties last year urging them not to adopt Indian Chit Fund Act 1982," Kamban alleged in the memorandum.

According to Kamban, the Reserve Bank of India did file a case against these institutions in the High Court vide OP No 4520/97 for violating RBI rules of Indian Chit Fund Act but the KSFA managed to obtain a stay order which is yet to be vacated. Two financiers from Thiruvananthapuram have now filed for insolvency suits after defrauding Rs 16 and Rs 21 crore each driving a few depositors to suicide.

Such financial institutions are also reportedly allowed to draw funds from legitimate institutions on untenable promises and once they accumulate a few crore of rupees they are permitted to close down their institutions filing insolvency suit in the High Court on fake reasons, Kamban charged.

Kamban also points out that both the Governments of Maharashtra and Tamil Nadu have promulgated ordinances against these private financial establishments and money lenders. Kerala, however, is yet to follow suit. "These blades will have to be faced with a Naxal-type of fight," Justice Krishna Iyer said. "Or we will be forced to form a People's War Group against them," Kamban adds.