Stay away from fraudulent Ponzi schemes – earn your freedom from financial mismanagement

This Independence Day, let’s make a pledge. Let’s free ourselves and our near & dear ones from the dangers of fraudulent financial schemes. Let’s ensure we make informed and rational decisions. We must not fall for fake inducements of high returns.

The after effects of the disastrous IMA scam are still echoing around us. The news may fade from media glare in a few weeks but the affected families will carry the scars from the incident throughout their lives. The trauma faced by lakhs of investors who fall for such dubious fund schemes is impossible to erase. While some senior citizens have put in their life savings, some women have invested for their daughter’s wedding expenses. Now they face years of dealing with police cases, mental trauma and massive financial loss.

Governments can make legal safeguards against such financial instruments. Police can take corrective action for recovering lost money. Media can educate the masses on such frauds. But only when the investor himself exercises caution and stays away from these schemes can the problem be eradicated. As long as investors get tempted by fraudulent claims of abnormally high returns, such fraudsters will keep emerging in different parts of the country.

You might ask ‘What are the ways to detect if a chit fund scheme is dubious or risky?’ Try out these simple tests and you will be able to make the decision yourself.

#1 Is it a government registered fund scheme?
Chit fund in India are supposed to be registered under the respective state governments as per the law. The finance ministry has explicitly clarified that Chit fund is regulated by Chit Fund Act, 1982 and is treated as Regulated Deposit as per Schedule 1 of Banning of Unregulated Deposit Ordinance, 2019. Unless the fund company is registered, do not invest with them at any cost!

 #2 Are they offering abnormally high returns?
Chit funds offering returns that are much higher than the market average are a cause for concern. With safe and legitimate methods of investment, it is impossible to offer more than 12-15% returns to investors. In many instances, the fraudulent Ponzi scheme gives the promised interest to investors for a few months and then vanishes with the principal itself. Beware.

 #3 Do they have transparent records on funds and investors?
Chit funds are easy to invest and operate as they have very few joining formalities. However, it is vital that the investor insists on verifying the chit fund company records before signing up. Check for yourself who are their promoters, how many existing customers do they have, what is their track record of repayments and where are they investing the deposits. A trust worthy company should be ready to show all their records in a transparent manner. If the chit fund company is not forth coming in sharing this information with you, then just back out.

 #4 Are there signed agreements between the investor and company?
No financial transaction is secure if there are no signed records to support the transaction. So in the event of a default or fraud, they are not questionable in a court of law if there is no documentary record to show as evidence. Irrespective of whom you invest your money with, even if it is an acquaintance, friend or family, insist on having a signed agreement between the 2 parties. For chit fund investments, you must receive a copy of your signed agreement which is acknowledged by the Registrar of Chits.

With these precautions in place, you can rest assured that your money is in safe hands. Chit funds as an investment instrument are an attractive option for investors, if only they take the right safeguards before investing.

We at Shanthala Chits are committed to ensure that every investor is educated about all the scheme details. Our successful track record of 23 years with thousands of satisfied customers speaks of our integrity and commitment. Shanthala Chits is registered under the Chit Fund Act of 1982, Government of Karnataka. So your money is safe with us. Get in touch to know more…

Here’s wishing all our readers and investors a happy Independence Day. Jai Hind!

Anuradha C

Anuradha is a freelance writer cum corporate trainer in the IT/telecom domain with over 18 years experience. She served in senior technical and management positions in Huawei and TCS for 10+ years. Then gave up the traditional corporate ladder to go solo - in order to escape horrendous city traffic and to be at her own boss!
Anuradha C

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