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'People like me will never invest in the stock market'

Syed Firdaus Ashraf and Shariq Siddiqui in Bombay

Soon after Jitendra Guha retired from the Maharashtra State Electricity Board, where he was a clerk, he received his provident fund and gratuity totalling Rs 250,000, a bigger sum than he had ever taken home in his life. He had already had a bad experience earlier when he put a hard-earned Rs 50,000 in stocks. The company sank like a stone.

Chastened, Guha decided that this time he would invest just half the money he had in a stable finance company and ensure its solidity by checking up with reputable credit agencies. He put his money on CRB.

Guha was one of the thousands of people who took for gospel what the highly-rated Credit Analysis and Research Ltd had to say about CRB, a non-banking finance company. He was among the bewildered depositors jostling each other at the Janmabhoomi hall when the Investors Grievances Forum met late last week.

"My daughter is 23 years old," says Guha, adding that he had planned a marriage next year. "I had invested the money, hoping that with the returns I could conduct the marriage."

There are 25,000 other families across the country finding themselves in a similar predicament, having collectively eked together approximately Rs 1.86 billion to invest in CRB deposit schemes. Most of this money came from pensioners investing their provident funds and pensions. These small investors put in between Rs 2,000 to about Rs 200,000.

Shivram Laxman Lad, a retired employee from the Bombay Electric Supply and Transport undertaking, invested Rs 50,000 in CRB. Says he, "I feel the RBI is taking interest because the State Bank of India has lost Rs 58 crores (Rs 580 million). Otherwise, the RBI is least interested in small investors like us. We don't have the resources to go to court and claim our money. Only the government can help us now."

Among the unluckiest of the investors was Vijay Tatahare, a retired worker from Premier Automobiles, who invested Rs 290,000 in three different CRB schemes.

When he invested, Tatahare thought it would be smarter to distribute his risk over different companies. But his agent reassured him that CRB was a solid investment. Tatahare can take little consolation in the fact that he was right. "I only have about Rs 40,000 left in mutual funds. How will I be able to support myself and my family for the rest of my life?" he asks. Tatahare had never held any investments, except employee shares in PAL.

Mr and Mrs Usgaonkar also put in Rs 15,000, in deference to advice from their broker. The CRB crash has shaken them so much, they are considering withdrawing their investments from other companies as well.

Says Mr Usgaonkar, "We trusted CARE and invested 20 per cent of our life savings in CRB. But, now CRB has cheated us... I do not expect that our money will be returned to us."

R R Michael, 81, sat apart from the others, alone in a chair. An investor in various companies since his retirement 35 years ago, he had chanced just Rs 5,000 in CRB. All his interest payments were paid to him in post-dated cheques that didn't bounce -- at least till March 1997.

Says he, "The problem with companies like CRB is that they give you post-dated cheques with confidence and pay you for some months. After that they disappear with the entire amount... Rs 5,000 is not a small amount for me. I shall have to be more careful where I put my money. Investments are my only source of income." He hopes the IGF will help him get back at least his capital, if not the interest.

Manoj Arora, a junior executive, invested much more -- Rs 105,000. Big money for him, he says. He is concerned about the RBI's decision to allow lending institutions to recover their dues before the investors's claims are considered. The company's assets have been stated at Rs 6 billion, he says, adding that actually they are worth much less. If lending institutions like SBI are allowed to stake their claim first, the company's assets will not be enough to compensate all the investors who have deposited a total of 1.86 billion.

Many investors put in money on the basis of advice from trusted agents and brokers. Most of them stand by the honesty of their brokers, perhaps not realising that agents were offered huge incentives by the CRB group to promote the deposit schemes. Few of them know much about the capital market anyway. Those who did went by the A+ rating awarded to the company by CARE.

Says Sulbhan Gajkonde, a clerk in the Maharashtra government, "There is no one else to take the blame but the Industrial Development Bank of India (of which CARE is an wing). "Either the RBI or the IDBI must return our money. The RBI is responsible because it could not keep a check on CRB," he says.

Meanwhile, the depositors hope the IGF will help get their money back since it primarily concerns itself with the claims of small investors. On-the-spot claims were collected from the investors by the IGF to be made part of a public interest litigation later.

IGF President Kirit Somaiya, who is also president of the Bharatiya Janata Party's Bombay unit, promised to present the investors's claims to the concerned agencies. He called for action against the the RBI, CARE and the Securities and Exchange Board of India.

Somaiya told Rediff On The NeT that senior SBI and CARE officials should be interrogated. "There is no need for the RBI to set up a special cell. They must admit that it was their mistake and return the money," he added.

Many investors are still not clear about what exactly happened, why NBFCs are not monitored like other banking institutions and, finally, why the company had shut down at all.

Gajkonde speaks gloomily: "The honeymoon... is over. People like me will never invest in the stock market." He already had a bad experience earlier with mutual funds and other investments during the Morgan Stanley affair, and in the stock market when the Harshad Mehta scam broke out. "We need to reform the financial market," he adds grimly.

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Photographs: Jewella Miranda