Moneylife Events
Keep your Money Safe: Avoid money traps and MLM schemes

Chain-money schemes like Saradha are flourishing in our country. Countless crores have been lost in this manner. But these schemes aren’t the only danger. There are internet-based scams, phishing scams, identity theft, job scams, and much else you could be fooled by. Sucheta Dalal briefed participants on all this and more during an informative two-hour seminar

Even experienced investors often make amateurish mistakes, being lured by the prospect of big returns. Almost every other month we get to know of a big scam in one state or another, where thousands of crores have been collected from investors, who have been promised high returns, sometimes of more than 100%, in a relatively short period of time. Often, you’ll be surprised by the kind of people who have invested in these schemes. Sucheta Dalal, managing editor, Moneylife magazine, said, “In 2010, for example, a pyramid scheme called City Limousine found investors from even within the RBI and Income Tax office. According to numbers in a Times of India story, 15 RBI officials, 200 I-T officers and no less than 6,000 police officers invested in this dubious scheme. At one point, 10,000 investors were protesting outside the Azad Maidan police station in South Mumbai, but the policemen themselves had lost so much money in the scam.”


Just two weeks ago, another scam, run by West Bengal-based Saradha group, was exposed. The group had collected at least Rs17,000 crore from people in the state. Ms Dalal says that such scams could easily be stopped if the government wanted to, but they are kept alive by politicians themselves. She said, “In the Saradha chit fund scam itself you must have heard of many politicians who have been named. This is what happens when any case comes to light. You probably know that the promoters of Japan Life, which had collected Rs5,000 crore from investors were close to two prime ministers. It is also known that around Rs990 crore was transported out of the country by a single politician for the promoter of Speak Asia. But perhaps the best example is Sahara, whose promoter, Subrata Roy, is often seen hobnobbing with the biggest politicians. Plus, the group sponsors the Indian cricket team. When this company asks villagers in Uttar Pradesh to invest, why wouldn’t they believe everything that was told to them?”

Ms Dalal says that the political connections of these dubious companies allow them to flourish. She said, “A lot of promises are made immediately after the scam is exposed, but nothing happens. At a previous seminar we’ve had officers from the Serious Fraud Investigation Office tell us that they would like to take action but the government opposes this. The only way to ensure you are safe is by focusing on what is being sold to you. Keep in mind that if something is too good to be true, it probably is.”


There are a number of variants of pyramid schemes, but Ms Dalal said that, in her opinion, the binary scheme is the most dangerous. She said, “Any scheme that requires you to draw in a couple of other people is always a scam. It doesn’t matter if there’s a product involved. The only reason there is a product involved is so that it doesn’t become a money circulation scheme.”


Aside from pyramid schemes, though, there are internet-based scams, identity theft, phishing scams and job scams. Ms Dalal said that of all these scams, the phishing scams have become most sophisticated. She said, “You may receive a mail, ostensibly from your bank. It will ask you for your bank details or tell you your internet banking password is being misused. All these details will give them access to your bank account. Usually these e-mails ask you to click a link, redirecting you to another web-page. Now one thing to keep in mind is that banks never ask you to do this. If there’s a link it’s a scam. But when giving such details out, always verify the identity of the sender. Just two days ago I received one such mail from Axis Bank. You should always call the call centre to find out whether this is real or fake.”

From scams, Ms Dalal then moved on to relationship managers, who have become a real menace. She said, “Relationship managers are a recent phenomenon. We didn’t always have them. They were first welcomed because they gave individual attention. But the reason for this service is simple—they want you to invest in certain third-party products that earn them good commissions. The dangerous thing about a bank trying to sell you such products is that they know exactly when money enters your account and, therefore, when to strike.” Ms Dalal advised participants to not only note down the name of the relationship manager trying to sell them products, but the names and numbers of his boss and boss’s boss as well, because relationship managers change jobs regularly.

When it comes to choosing a bank, Ms Dalal said that government banks are the safest. Small cooperative banks are the ones that go bust most often and should be avoided. She said, “Public banks are sarkari and the government cannot afford the embarrassment of letting a public bank default of deposits. So your money is safe there. Even large private sector banks are safe because the government considers them too big to fail. Cooperative banks are dangerous because they are shakily run and politicised.


Lastly, Ms Dalal touched upon credit cards and the inherent risks of using them. She said, “Credit cards are necessary. They can be life savers in emergencies. But they can burst like bombs if you’re not careful. The interest rates are enormous, there are all sorts of charges and your bill could swell easily if you’re not careful.”




Madhur Kotharay

3 years ago

What is the story with Sahara? Are they doing similar stuff like the Saradha Group?

And if yes, why is the (floated by Sahara) ad on your website?

Vaibhav Dhoka

3 years ago

An eyeopener for common man but cheats are extraordinary smart as seen from City Limousin fraud where Over smart people were cheated.The reason GREED.

Disappointing display by Ador Fontech; net sales dip 3%

The company has experienced two bad quarters and hopes to revive its fortune with the capital it got from the sale of one of its non-operational plants

Ador Fontech has reported 3% year-on-year (y-o-y) dip in net sales for the quarter ended 31 March 2013 to Rs39.90 crore, from Rs41.01 crore in the march 2012 quarter. Despite the fall in net sales, its net profit rocketed 147% y-o-y, from Rs3.40 crore to Rs8.39 crore, due to sale of its non-operational factory at Ahmednagar which was reflected in other income (other income was Rs9.95 crore).

Moneylife had featured the company in our Street Beat section of the Moneylife magazine. We had also written about the company way back in 2010, when the stock was quoting at Rs50. You can access the write up here Ador Fontech: Get Welded.

The results were disappointing, with the decline in net sales as well as operating profit. The latter saw a sharp 45% fall for the quarter ended March 2013, which followed the previous quarter dismal performance. It has been particular bad two quarters for the company but it is expected to do something with the money it got from the sale of the Ahmednagar plant. The company’s market capitalisation is valued at nearly 10 times operating profit. Return metrics are quite impressive, with return on networth and return on capital employed at 32% and 35% respectively.

Ador Fontech is into welding, surfacing and spraying solutions, as well as value-added services such as recycling, etc.


Nifty, Sensex may come under some selling pressure: Weekly Market Report

The market will remain volatile ahead of 3rd May when the RBI will announce its monetary policy for 2013-14. A weekly close below 5,800 will see Nifty head lower again

The Indian market closed the holiday-shortened week on a firm note on mixed earnings reports and hopes that the Reserve Bank of India, in its annual monetary policy to be announced on 3rd May, will reduce key rates on the back of a fall in headline inflation numbers. The coming week is expected to be an event-heavy week with continuation of corporate results, fiscal deficit data for March to be announced on Tuesday, RBI’s macro-economic review on Thursday and release of the annual monetary policy on Friday.


The Sensex settled 270 points (1.42%) higher at 19,287 and the Nifty closed the week at 5,871, a gain of 88 points (1.53%). The market will remain volatile ahead of 3rd May when the RBI will announce its monetary policy for 2013-14. A weekly close below 5,800 will see Nifty head lower again.


The market closed in the green on three of the four trading days in the week. The market closed with decent gains on Monday despite a fair deal of choppiness that was seen in the first half of the trading session. The market managed to close with a positive bias helped by a late recovery on Tuesday. The stock exchanges were closed Wednesday for a local holiday.


The benchmarks settled in the green on Thursday on gains in auto and healthcare stocks. Profit-taking in rate-sensitive sectors led the market lower on Friday.


BSE Auto (up 4%) and BSE Capital Goods (up 3%) were the top sectoral gainers while BSE IT (down 5%) and BSE TECk (down 2%) were the losers.


The top performers on the Sensex were Maruti Suzuki (up 10%), Coal India, HDFC (up 7% each), Bharti Airtel and Hero MotoCorp (up 6% each). The losers were led by Wipro (down 10%), Jindal Steel & Power (down 7%), TCS (down 6%), Hindustan Unilever and Infosys (down 4% each).


The key gainers on the Nifty were Maruti Suzuki (up 10%), HDFC, Kotak Mahindra Bank (up 7% each), Coal India and Bharti Airtel (up 6% each). HCL Technologies, JSPL (down 7% each), TCS (down 6%), DLF and HUL (down 4% each) were the major losers on the benchmark.


India is expected to have normal monsoon this year with overall rainfall of 98%, news that will bring smiles to millions of faces of farmers who depend on good rains for a bumper harvest, earth sciences and science and technology minister S Jaipal Reddy said on Friday. The minister added that there was 46% probability of a normal monsoon as against 27% probability of below normal rains this season.


Among corporates, UltraTech Cement disappointed the market with its fourth quarter net profit slipping 16% to Rs726 crore. Cairn India’s numbers lagged estimates as its Jan-March net profit rose 17.1% to Rs2,564 crore versus Rs 2,186 crore in the same quarter last year.


Non-banking finance company M&M Financial Services’ consolidated net profit grew by 42.9% year-on-year to Rs 346.4 crore in fourth quarter FY13, helped by exceptional gain. Foundry major Foseco India reported disappointing results as its Q4 net profit declined 16% to Rs5.81 crore.


HDFC Bank reported a 30% year-on-year rise in its fourth quarter net profit at Rs1,890 crore, aided by robust interest and other income. Axis Bank’s net profit for the quarter ended March 2013 grew 22% y-o-y to Rs1,555 crore, driven by the strong growth of its retail franchise.


Hero MotoCorp disappointed the market as its net profit net profit of Rs574.23 crore for the March quarter grew a meagre 5% y-o-y compared to Rs603.59 crore for the previous corresponding quarter. ICICI Bank on Friday reported a 21% year-on-year rise in its fourth quarter net profit at Rs2,304 crore on a standalone basis, driven by robust growth in net interest income.


In international news, US GDP (gross domestic product) rose at a 2.5% annual rate in the first quarter of 2013, lower than forecast, after a 0.4% fourth-quarter advance, according to government data. Besides, the Thomson Reuters/University of Michigan index of consumer sentiment slid to 76.4 in April from 78.6 in a previous month.


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