A Crowded Bazaar

NO other business in Bihar is perhaps as lucrative today. The activities of non-banking finance companies (NBFCs) almost amount to loot, the way they have been mobilising deposits and disappearing. As the state government cobbles together its strategy to fight the menace, investors have been left with no option but pray. Overnight, new companies are emerging with the sobriquet "Group of Companies". The discerning investor must ask such questions: what would be the net worth of some of these companies, where are the deposits being invested,are companies conforming to RBI norms? Well, who's educated enough to ask.

The names are innovative, to say the least. Sample some: Rituraj Group of Companies, Polyactive Group of Companies, Veerbhumi Group of Companies, Kapil Ganga Group of Companies, Bramharshini India. The list is endless. It is from this list that every now and then a company or two 'disappears' with the deposits. Last week, there were reports in Patna newspapers that Jitodaya Finance had closed shop. Despite such scares, more new companies are being formed than being closed down. For example, Linkers group of companies was promoted by one Vijay Shankar Vajpayee, who had first worked with Sahara and then the JVG Group. Vajpayee also launched a magazine, Vichaar Mimansa, from Bhopal. After 11 issues of the magazine, it disappeared from the stands. And there is no trace of Vajpayee either.

Early this year, the government told the assembly that there were 7,386 NBFCs in the state. What has made regulation impossible is that nearly 525 are registered with the Registrar of Companies. Interestingly, when the regional office of the RBI made inquiries, the addresses of some firms could not be located and registered letters found their way back to the RBI office. Confirms RBI's Patna emissary, chief general manager A.M. Garg: "We are processing the cases of 500 companies." Alleges Sushil Modi, leader of Opposition: "Some companies are collecting deposits despite a ban."

The rest of the 6,800-odd companies are either partnership or proprietorship firms, for which there is no method of control. The issue now is who will bell the cat, since prominent state politicians are being linked to several companies. Modi says action should be taken since they haven't obtained permission to collect deposits.

Would it not be prudent to publish a list of companies which are allowed to collect deposits? No, say RBI officials, since even if they are banned from collecting deposits later, they could show old advertisements as proof that they are permitted to collect deposits and con unsuspecting investors. In the melee created by the NBFC loot, investors cribbing, government not regulating activities, business is as usual in Bihar.