Vijayawada: The recent searches against chit fund companies including the popular Margadarsi of media baron Ramoji Rao revealed alleged large-scale illegal diversion of funds into fixed deposits and mutual funds, running into hundreds of crores, officials said.
Teams of the Stamps and Registration department found Margadarsi had been withholding the payment of chit money to its subscribers for months under the guise of lack of adequate sureties. “As per rules, the amount should be deposited in a separate bank account and paid to the subscriber after completing due process. But, Margadarsi diverted these amounts into fixed deposits or mutual funds and earned huge interest. Even funds from the statutory reserves are diverted,” a senior official said.
Officials submitted a preliminary report after the investigations, according to which the amount earned by Margadarsi from the interest on FDs and returns from mutual funds was equal or more than the five per cent commission the company legally earned as a foreman for organising chits.
“The modus operandi was that Margadarsi delayed payment of the chit amount by at least three months and diverted the fund. While 10 per cent subscribers are paid promptly, the payment for the remaining 90 per cent was withheld.”
“In several instances, at least 30-40 per cent vacancies in each group are filled by the company itself acting as a subscriber. The probability of a genuine subscriber becoming a prized member was always narrowed down.”
The inspections also revealed that several times the company acted as the prized bidder and the money paid by the genuine subscribers was stashed within the company, the official said.
As per the balance sheet of Margadarsi for the financial year that ended on March 31, 2022, the share capital of the company was just `2 crore, but the cash reserves were of Rs 1697 crore, fixed deposits `768 crore and investment in mutual funds Rs 459 crore. The prize money to be paid to subscribers was just Rs 580 crore.
Another flaw, claimed by the officials, was that the company never disclosed crucial information relating to the number of subscribers, as also the chit assets and liabilities in the balance sheet, and flouted the mandatory requirement of opening of bank account for every chit group....