The govt of India has asked the Sahara Group’s credit cooperative society to explain why it has not yet paid money due to its investors, reports ET.
According to govt officials, the govt. has received several complaints about non-payment.
The Sahara Credit Cooperative Society was set up in 2010.
The Sahara group claims it has refunded 95 percent of the amount due to the investors.
Sahara and its founder Subrata Roy have been under scrutiny for years over its financial products, including for possible money laundering.
The Supreme Court said the 2008-11 plan violated market disclosure regulations on raising capital, including failure to file a prospectus – a legal document that provides details about a financial product for investors – with the markets regulator.
Selling time deposit plans through loosely regulated credit cooperatives is rampant in India.
They collect deposits from investors for a fixed period of time and promise to return the money at interest rates higher than what banks offer.
In addition to hunting for new customers, Sahara agents and branch officials are also trying to get investors in older Sahara savings plans to switch into the new credit cooperative schemes, according to Reuters interviews with these investors.
Sahara turned to credit cooperatives mainly because of their relatively weak oversight, said current and former senior Sahara employees, who said they were briefed on the these financial plans by Sahara’s senior management. Those that operate across state lines are registered not with the central bank but with the credit cooperatives division at the Ministry of Agriculture.
The first of the Sahara credit cooperatives, Sahara Credit Cooperative Society Ltd, was set up in 2010, around the time when India’s markets regulator started investigating the Sahara bond scheme the Supreme Court would later declare illegal.
Sahara has started three more credit cooperatives since January 2014: Humara India Credit Cooperative Society, Stars Multipurpose Cooperative Society and Saharayn E-Multipurpose Society.