Doubts raised over sav­ings scheme for Ker­ala ex­pats

Gulf Times - - INDIA - By Ashraf Padanna

The Congress-led op­po­si­tion in Ker­ala has asked the state gov­ern­ment to clear all am­bi­gu­ity over the new sav­ings scheme for ex­pa­tri­ates it plans to launch next month.

Op­po­si­tion leader Ramesh Chen­nithala said Fi­nance Min­is­ter Thomas Isaac was de­lib­er­ately mis­lead­ing peo­ple on the Pravasi Chitty scheme.

“Isaac is try­ing to mis­lead peo­ple by cre­at­ing a smoke­screen,” he said in a state­ment here yes­ter­day.

“The scheme lacks trans­parency, and it’s il­le­gal as it does not pro­vide the manda­tory se­cu­rity to sub­scribers,” Chen­nithala claimed.

In a chit fund or chitty, the sub­scribers pay a monthly in­stal­ment to get back in a lump sum amount through auc­tion or by the draw of a lot.

The state-run Ker­ala State Fi­nan­cial En­ter­prises (KSFE) is the ad­min­is­tra­tors of the scheme, and the Ker­ala In­fras­truc­ture In­vest­ment Fund Board (KIIFB) man­ages the funds.

The state has set tar­get of rais­ing Rs100bn ($1.49bn) through the scheme this year to build two high­ways, and the au­thor­i­ties were ex­pect­ing 200,000 sub­scribers in the first year.

Isaac hopes to tap the funds ex­pats send to their fam­i­lies ev­ery month.

The op­po­si­tion claims the gov­ern­ment had not re­ceived the per­mis­sion of the bank­ing reg­u­la­tor for the scheme and it could end up pay­ing the penalty for not pro­vid­ing se­cu­rity for the equal amount they col­lect.

The cash-strapped state which ranks 21st in the ease of do­ing busi­ness - spends all its rev­enue on salaries, pen­sions and debt ser­vic­ing.

It is now sit­ting on a mas­sive pub­lic debt of Rs2.07tn ($31bn), and the dip in overseas re­mit­tances has hit its ser­vice-sec­tor driven econ­omy hard.

As it has crossed the bor­row­ing limit, the state wants to use the Pravasi Chitty scheme funds for in­fras­truc­ture build­ing like high­tech class­rooms. The state has set a tar­get of col­lect­ing Rs500bn in five years through the scheme.

“Isaac is hood­wink­ing peo­ple with­out an­swer­ing the ques­tions K M Mani (his pre­de­ces­sor as fi­nance min­is­ter) raised,” Chen­nithala claimed.

“He has pre­sented the scheme with­out even read­ing the fed­eral laws on start­ing one. He owes the peo­ple an ex­pla­na­tion,” Chen­nithala said.

Re­ject­ing Chen­nithala’s claims that the scheme lacked reg­u­la­tory sanc­tions and is hence il­le­gal, Isaac said he was con­fi­dent of rais­ing Rs100bn from the scheme im­me­di­ately.

Though the min­is­ter claims he has all the statu­tory clear­ances, op­po­si­tion lead­ers are not sat­is­fied as Isaac was un­able sup­port his claims with doc­u­men­tary ev­i­dence.

They say the scheme doc­u­ments are am­bigu­ous and con­tra­dic­tory to the law, which does not al­low the gov­ern­ment to di­vert funds to KIIFB bonds as planned.

If KSFE wishes to start chit­ties for such enor­mous amounts, it needs to de­posit an equal amount in a li­censed bank, not KIIFB, and give a guar­an­tee to in­vestors.

When the ques­tion came up in the as­sem­bly, Chen­nithala said, Isaac had said he would de­posit the se­cu­rity money with the KIIFB be­fore ac­cept­ing funds from the ex­pats.

But the law and the bank­ing reg­u­la­tor do not al­low a chitty with­out a se­cu­rity de­posit in a sched­uled bank, they ar­gue. En­rolling ex­pats in such a scheme with­out any se­cu­rity is il­le­gal, they added.

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