Sebi to teach Bihar govt how to prevent Saradha-like scam

Sushil Kumar Modi has asked MCA to conduct forensics on chit fund, other companies operating in Bihar

Anxious to prevent a repeat of West Bengal in Bihar, state Finance Minister Sushil Modi has requested all the top finance regulators to send a team of officials to Patna to advise on best practises in dealing with scams like the Saradha scam.

Modi told Business Standard that a Sebi team will arrive in Patna on Wednesday, and he has also asked officials from the Ministry of Corporate Affairs to conduct forensics on chit fund and other companies that are operating in Bihar.

“When I heard about Rose Valley’s operations in Midnapur, I was a little worried. Typically compnaies of this kind operate all over East India, defrauding small investors. Hence I have requested a team of officials to brief us on what steps we can take to prevent an occurrence of a Saradha-like scam in Bihar” Modi told Business Standard.

He said state government officials didn’t even know how many such companies were operating. He said it was not his intention to wind up those companies that were doing legitimate chit fund business.

“But this is money that belongs to very poor people and I am determined that they must be protected”, he said. He also said he was studying the Kerala model of a state-owned chit fund company that mobilised small deposits.

Interstingly, UK Sinha, the current SEBI chairman is a Bihar cadre IAS officer who has served as  District Magistrate in Patna. Modi said he spoke to Sinha when he visited Mumbai earlier this month and flagged the issue with him.