The West Bengal government has stepped in for damage control after chit fund company Saradha Group went bust reviving memories of the collapse of Sanchayita Investments in the early eighties when several investors and agents committed suicide.
Sanchayita collected more than Rs. 120 crore in 1980 before its offices were raided and it folded up with only a handful of people getting back a minuscule amount of money.
Two main promoters of the group were arrested with one of them, Shambhu Maukherjee, committing suicide and Swapan Guha being declared insolvent by the court.
Another accused Biharilal Morarka is still at large.
As for investors and agents, there are reports of several committing suicide and a handful pinning hope against the hope with a criminal case dragging on in court for more than 30 years now.
The West Bengal government has announced formation of a Special Investigation Team and a high-level inquiry into chit fund companies after the collapse of the Saradha group.
The bubble burst after capital market regulator SEBI started cracking the whip on chit fund companies for flouting rules, triggering pressure on the group's finances.
The Union ministry of corporate affairs had also started looking into allegations of financial irregularities and default in payment levelled against the Saradha Group and other such companies.
The state government's action came after three people, who were either investors or agents of Saradha group, took their own lives as protests continued to rock several parts of the state with Saradha group chairman, Sudipto Sen on the run.
The TMC is currently on the backfoot after the chorus for arrest of its MP Kunal Ghosh, who was group media CEO of Saradha Group, when it forayed in big way into the media business by acquiring a number of newspapers in Bengali, English, Hindi and Urdu and taking over several news and entertainment channels.
Chief minister Mamata Banerje has said that her TMC government was transparent and that the law would take its own course.
With both the opposition CPI(M) and Congress blaming the Trinamool Congress for remaining silent on chit funds, Banerjee has said since the operations of chit funds were governed by central laws and not by the state government, "The onus lies with the central government."
Squarely laying the blame on the erstwhile Left Front regime, Banerjee has said. "It was during Left regime that the business of chit funds mushroomed in the state. What were they doing? The law they had proposed to tackle chit funds with was flawed."
Contesting this, former finance minister and senior CPI(M) leader Asim Dasgupta said. "We had initiated action against the Saradha group and some other chit fund companies.
"The Trinamool government from the very beginning has taken a go slow approach towards them. After coming to power the investigations were simply put on the back burner," he alleged.
According to Dasgupta, who is also a noted economist, nearly 15 large chit fund companies including the Saradha group, have been operating in the state in last few years amassing over Rs. 30,000 crore.
Economist Abhirup Sarkar added that small savings in banks and post offices had dipped to an all time low in the last two years and felt that neither the Trinamool Congress nor the Left regime had taken enough steps to tackle the mushrooming of chit funds in the state.
"It is for the central government to regulate these chit funds but that doesn't mean that a state government will sit idly when these chit funds are fleecing people," Sarkar said.
"Nobody can deny that because of these chit funds, investments in small savings schemes of banks and post offices have dipped to an all time low in the last two years," he said.
"It is fact that neither the previous Left regime nor the Trinamool Congress government showed much needed seriousness in tackling chit funds," Sarkar said.
The Saradha group's fortunes nose diving has not only put a scanner on other chit fund companies operating in the state, but has also reportedly put a question mark on TMC's rural vote.
"This issue will be a big headache for Trinamool Congress rural vote bank. It will severely erode its rural votes," said a political scientist on condition of anonymity.
But the possibility of erosion in the rural votebank has been totally dismissed by Trinamool Congress General Secretary Mukul Roy.
CPI(M) leader Mohammed Salim claimed, "The impact will be disastrous compared to Sanchayita as the money involved is thousand of crores. The state government was aware of it but had delayed taking action in order to give them time to siphon off the money."