Two days ago, some 24 hours after Sahara's Subrata Roy had been arrested at the command of the Supreme Court, I had an interesting phone conversation with a Sahara depositor. This was someone who was not just made a deposit with Sahara in the past, but was planning to do so again, soon. He knows many people who are regular Sahara depositors. He had a form with him for two schemes. One of them offered a gain of 10 per cent for a tenure of one year and the other, a gain of 40 per cent for a deposit period of 48 months. That's also about 10 per cent.
There are a several things here that those who are acquainted with the Sahara affair only from TV and newspapers would find surprising. One, there is still financial business being conducted under Sahara brand. This example is from Jharkhand, and not from a small town either. Two, there are people who are still willing to deposit money with Sahara. This particular depositor is an educated man who has access to the entire range of financial instruments. Three, I think there are at least some commentators in the media who would be surprised that there is any such thing as a Sahara depositor. And four, those who'll try to think through this thing will see that 10 per cent per annum is hardly an outsize or a Ponzi-like return being offered.
So why are people still willing to deposit money with Sahara? As far as I can see, simply because they started doing so in the past and the experience has not been negative. They did so in the past, got their money back with the promised returns and it just goes on, even when they have access to alternatives.
The thing about Sahara, which is getting lost in the excitement about the legal tricks that the Sahara group has been playing with SEBI and RBI, is that there is a real savings and investments business that exists. This business is likely to be illegal now, likely to be declining, it may be wrapped up in a larger money-laundering scheme, and it's scale may be smaller than the claims of the Saharas. However, there really are a large number of depositors who use Sahara's services and have done so for years, even decades. This is something that anyone who has first-hand familiarity with life in small towns of the Hindi belt can vouch for.
This business still exists. When, in 2008, the RBI asked Sahara to wind up this business, it should have done so in a law-abiding manner. However, it didn't and the RBI failed to detect that it didn't. Currently, there is a lot of noise being made about the interests of the depositors by the various authorities and the media. However, the actual focus and the actions do not have the depositors' interests at heart. One reason is that there is a certain belief that these depositors don't exist, that Sahara is entirely a money laundering scheme. This simply isn't true.
To my mind, the most important question today is what is the real base of investors and if there are enough assets backing their deposits. The long period over which Sahara has existed and the reasonable returns it offers makes it unlikely that it's an out and out ponzi scheme like Saradha in Bengal and so many others. However, there may well be some shortfall in assets.
Sahara may be a rogue financial institution. And if the rogue part of that description is true, but so is the financial institution part. The most important thing today is to provide a safe exit to the real depositors. The cat and mouse game of the so-called Sahara Shri will no doubt continue to entertain all of us for a while. However, someone needs to pay some attention to the real small depositors.
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